Household Electrical Waste: Disposal

Baroness Wilcox: asked Her Majesty's Government:
	What preparations are being made for the coming into force of the proposed Waste Electrical and Electronic Equipment Directive (COM(2000)347) which requires the recycling and safe disposal of all household electrical waste.

Lord McIntosh of Haringey: My Lords, the proposed directive is in draft. Major policy issues still need to be agreed between the European Parliament and the Council of Ministers through the conciliation process. Detailed preparation will commence once a final text is available towards the end of this year.
	The first formal consultation was undertaken by the DTI during autumn 2000. There has subsequently been significant informal discussion, and specific small and medium enterprise and retailer focus groups have been established. A series of 20 awareness seminars across the United Kingdom are planned for the summer. We are also monitoring implementation plans in other European Union member states to help to ensure a broadly level playing field.

Baroness Wilcox: My Lords, I thank the Minister for that helpful reply. However, does he agree that last month's vote by the European Parliament to remove a time-limited exemption of five years for the micro-businesses to which he has referred from the financing of collecting, recycling and treating electrical waste will cause great, and sometimes insurmountable, difficulties for many of Britain's smaller businesses unless the conciliation committee reinstates its exemption? If he does agree, will he tell the House what efforts Her Majesty's Government will make to reinstate the exemption?

Lord McIntosh of Haringey: My Lords, we generally support the directive, but our support is for the common position taken up by member states rather than for the amendments introduced by the European Parliament. So my answer to the noble Baroness's first question is: yes, we agree with her that the amendments are unhelpful—although, of course, they are well meant. In the conciliation process we shall be working hard with the governments of other member states to ensure that we return to a point as close to the common position as we can.

Lord Greaves: My Lords, does the Minister accept that some of the amendments by the European Parliament were passed by huge majorities? For example, the amendment to compel producers to provide up-front guarantees for the financing of the future disposal of their products was passed by 525 votes to nine, with two abstentions. In view of the overwhelming weight of opinion in the European Parliament, will the Minister accept that the conciliation process will have to be a genuine compromise, and that some of what I consider to be the excellent amendments strengthening this much-needed directive will have to be accepted?

Lord McIntosh of Haringey: My Lords, that is why I said that the European Parliament's amendments were well meant. Some of them are perfectly acceptable and manageable. However, there are particular problems for this country—for example, in the amendment requiring compulsory separation of waste by consumers. It is easier in countries that have fewer personal household-to-household collection systems than we have. The European Parliament has set rather high recovery targets: 90 per cent for white goods and automatic dispensers. We are pretty close to that and it is not too much of a problem for us. However, other member states will find it difficult to achieve those targets. Again, the problem of individual producer responsibility for financing waste extraction, except where that would be uneconomic, presents difficulties. These are genuine differences. As the noble Lord, Lord Greaves, rightly says, they need genuine compromise.

Lord Berkeley: My Lords, whether or not the common position is adopted, what will it mean for disposal? There is presently a "fridge mountain" in this country. European directives came in apparently without any means being available for the disposal of refrigerators to comply with them. Are we to have an electrical waste mountain, or will proper facilities be built before the directive comes into force?

Lord McIntosh of Haringey: No, my Lords, the situation is entirely different from what my noble friend refers to as the "fridge mountain". That was a regulation, not a directive, and it had to be enforced immediately. The technology simply did not exist for the recovery of hazardous materials from refrigerators. In this case, this is a directive. There are 18 months for it to be brought into law, and the technology already exists.

Lord Pearson of Rannoch: My Lords, does the Minister believe—

Lord Campbell of Alloway: My Lords, may I ask—

Lord Williams of Mostyn: My Lords, both noble Lords have subsided. Perhaps we should hear the noble Lord, Lord Pearson, first.

Lord Pearson of Rannoch: My Lords, does the Minister believe that the British people would have voted in 1975 to stay in what was then the Common Market if they had known that this sort of ruinously expensive nonsense and thousands of similar regulations were to be forced upon them by what has become the European Union?

Lord McIntosh of Haringey: My Lords, I simply deny that this is a "ruinously expensive nonsense". This is a genuine attempt to improve environmental quality. It has to be done on a European-wide basis rather than on a national basis, because environmental pollution is no respecter of frontiers. Although we have difficulties with some of the provisions, this is a thoroughly desirable directive.

Lord Campbell of Alloway: My Lords, accepting that the Minister's exposition is totally right in terms of the Government's attitude, will he none the less accept that this vast directive is an obvious manifestation of the idiocy of the pretence that the Commission pays any attention to subsidiarity?

Lord McIntosh of Haringey: My Lords, I have already answered that question. Environmental pollution does not respect national boundaries, so action has to be taken at European level. That has been the case not just for this directive, but for many environmental directives in the past—and I hope that it will continue to be so in the future.

Lord Stoddart of Swindon: My Lords, what is the status, if any, of the United Kingdom Parliament in considering these measures? Will Parliament be able to refuse consent to matters that have been agreed in Europe and which will be very costly for British firms and British people? Will it be possible for the United Kingdom Parliament to throw them out?

Lord McIntosh of Haringey: My Lords, a directive has to be complied with by national legislation, so the matter will come before the Parliament of this country. If your Lordships feel strongly about it, no doubt the European Union Committee could look at the issue.

Lord Glentoran: My Lords, is the Minister aware that the Conservative Party supports the directive? Does he agree—and he probably does not—that the Government have got to the start line somewhat late in preparing for it?

Lord McIntosh of Haringey: My Lords, you could have fooled me. I do not know on what basis the noble Lord, Lord Glentoran, says that the Government are late at the start line. As I said in my original Answer, we have been consulting on the issue since 2000, soon after it was first raised.

Government Expenditure

Lord Barnett: asked Her Majesty's Government:
	What is their policy on underspend of public expenditure by government departments.

Lord McIntosh of Haringey: My Lords, the public spending system introduced in 1998 provides three-year budgets for departments and allows underspends in one year to be carried over to the following year. Budgets are linked to targets for results set out in public service agreements. This encourages departments to plan their budgets over a longer time-frame and reduces the incentive to spend wastefully at the end of the year.

Lord Barnett: My Lords, I thank my noble friend for that Answer, I think. Does he accept that there is a serious issue here? We are not talking about petty cash. As I understand it, the underspend in departments in the year to April last year was approximately £6.2 billion. In those circumstances, is it the Treasury's policy to ensure that departments underspend and do not rush to spend in March each year, as has happened in the past, not necessarily in the best possible way? Are departments worried that if they underspend for any length of time, that underspend will be transferred to other departments?

Lord McIntosh of Haringey: My Lords, I am more grateful to my noble friend for the timing of his Question than I am for the accuracy of his supplementary question. The timing is excellent because last Friday we published the public expenditure statistical analysis, which gives the figures for this year, not the figures that he quoted. The up-to-date figures show that total underspending on public services—what we know as departmental expenditure limits—over the past three years has been only 1 per cent of the plans. I call that pretty accurate for any business or government.

Lord Campbell of Croy: My Lords, does the noble Lord agree that one department that should not be underspending is the Department for Transport, Local Government and the Regions where the Minister has problems of staffing and of communicating with the media? He may well be in need of more resources, not less.

Lord McIntosh of Haringey: My Lords, as I explained in my original Answer, the reforms that we have introduced ensure that if there is an underspend, the money can be spent in succeeding years. We therefore do not have the frantic expenditure during February and March, often on stupid things, which I remember from my time as a member of a local authority. The system is much better for all departments. Of course, there is bound to be slippage on large capital programmes with long lead times. This is expenditure by arm's-length agencies with responsibility for their own finances. I have made it clear that the underspend across government as a whole is very small—only 1 per cent over the past three years.

Lord Newby: My Lords, the Minister has already said that a large proportion of the underspend is capital expenditure. Does he accept that one reason for that is that there has been a serious erosion of the capacity in national and local government to manage projects because of many years of underfunding under the previous administration and during the first two years of this administration? Finally, does he mean that underspend can be carried from one year to the next or, as he said in his second answer, that it can be carried over several years? Could we find ourselves in the ridiculous position of some EU programmes, with bits of budget carried over year after year? When will that end?

Lord McIntosh of Haringey: My Lords, it is not bits of budget that are carried forward. The end of year flexibility provides that last year's underspending can be spent this year. If there is still an underspending at the end of this year, it will not be identifiable as last year's underspending, it will simply be part of an underspending that is carried forward. That ridiculous situation described by the noble Lord, Lord Newby, does not exist here. I do not agree with the noble Lord on his first point. I think that the resources are available in this country and the capacity for the capital expenditure that is necessary for our public services, which is made possible financially by our Budget, helped, of course, by our resource accounting procedures.

Lord Saatchi: My Lords, may I underline the seriousness of the Question asked by the noble Lord, Lord Barnett, and that asked by my noble friend Lord Campbell—neither of which the Minister seemed to take very seriously? Am I right in saying that, last year, the Secretary of State for Transport underspent by £350 million? Will the Minister give the House an assurance that there will be no underspending on capital investment in the transport department this year?

Lord McIntosh of Haringey: And I, my Lords, underline the seriousness of the answers that I have given to the noble Lords, Lord Barnett and Lord Campbell. In point of fact, the most recent figure for underspending by the Department of Transport is not £350 million but £530 million. I say that simply in the interests of accuracy, as always. I shall not, however, give an assurance that every penny of that will be spent in this year because, as I said, the Department of Transport is responsible for very large capital projects with very long lead times. However, if it is claimed that the Government have a problem with underspending either on resourcing or on capital, then that claim is just plain wrong.

Lord Barnett: My Lords, I appreciate the figures that my noble friend has given. Is he aware, however, that 1 per cent of public expenditure is approximately £4 billion and that 1.5 per cent is approximately £6 billion? He has not answered my specific question about departments such as the Department of Transport. If they have an underspend for more than one year, will that underspend be transferred to other departments to spend?

Lord McIntosh of Haringey: My Lords, no. Departmental expenditure limits are as described. In other words, underspending can be carried forward, but it cannot be carried forward to other departments other than by agreement between the two departments concerned and the Treasury.

Baroness Carnegy of Lour: My Lords, what happens at the end of three years? Can the underspend be carried forward at the end of three years or can it mount up forever?

Lord McIntosh of Haringey: My Lords, the spending reviews are a rolling programme covering three years' expenditure. One of the improvements which I hope the House will agree is helpful is that departments have their budgets for three years rather than just for one year. Therefore, they can plan properly ahead. Then, every two years, we have an expenditure review, as we shall have this summer, at which the three-year rolling programme is updated. That is a much more sensible way of managing these matters than existed in the past.

European Arrest Warrant

Lord Lamont of Lerwick: asked Her Majesty's Government:
	What help they intend to give to the 12 British plane spotters convicted by a Greek court of espionage; and whether this case in any way changes their attitude towards the European arrest warrant as set out by the Lord Rooker in this House on 23rd April (Official Report, cols. 229–235).

Lord Rooker: My Lords, the Government are continuing to provide full consular support. Additionally, my right honourable friend the Foreign Secretary will be meeting the group and the families on 23rd May. As for the second part of the noble Lord's Question, the answer is no. As everyone knows, in the summer we shall publish a draft extradition Bill which will deal with the European arrest warrant.

Lord Lamont of Lerwick: My Lords, I thank the Minister for that reply. I also welcome the fact that the Prime Minister has said that the Government will give all the help they can to the plane spotters; that the Foreign Secretary has called the sentences disproportionate; and that both the Foreign Secretary and the Prime Minister have said that they have spoken to their opposite numbers several times about the case. Is it not plain from the lengths to which the Government are going that, whatever Ministers say, the Government do consider it a travesty of justice that a woman sitting in a van completing a crossword puzzle should receive a sentence for espionage? As the Prime Minister and the Foreign Secretary have to go to these extraordinary lengths to give whatever limited help they can to protect people from the vagaries of Greek justice, is it not clear that there is infinitely greater scope for capriciousness from the European arrest warrant? Will the Government therefore either build in safeguards to the proposals or, better still, drop the matter completely?

Lord Rooker: My Lords, I would like to comment on those points, but I cannot because the case is subject to appeal. However, extradition was not an issue in this case—

A Noble Lord: Oh!

Lord Rooker: The arrest took place in Greece, not the United Kingdom, so the issue of the European arrest warrant does not arise and one cannot connect the two matters. The noble Lord, Lord Lamont, for various reasons, may want to use the case as an argument against the European arrest warrant, and I have no doubt that he will do so eventually, but I do not think that the argument holds water. The case is subject to appeal and I think that we should leave it there. When we have the extradition Bill in front of us, there will be plenty of opportunities in this House and in the other place to express all our feelings about other countries' judicial systems.

Lord Goodhart: My Lords, I must declare an interest as a trustee of Fair Trials Abroad, an organisation which has been assisting the defendants in this case. Does the Minister agree that there are serious concerns about the procedure in this case, including for example the fact that the hearing lasted for a more or less continuous period of 14 hours? Does he agree that it is of the highest importance that member states of the European Union should be prepared to adopt and observe common minimum standards of procedure in parallel with the European arrest warrant?

Lord Rooker: Yes, my Lords; I agree entirely with the latter remarks of the noble Lord, Lord Goodhart. We have to do that. I believe that such steps in any reasonable judicial system would obviate the need for the type of hearings that took place in this case.

Lord Waddington: My Lords, surely the Minister will agree that a project such as the European arrest warrant can work only if the countries concerned have complete confidence in the other countries' judicial systems. How can it be said that we have really reached the stage at which the various countries involved in this project have such confidence?

Lord Rooker: My Lords, if and when the European arrest warrant is part of the process, anyone in this country subject to the warrant because of an allegation in another country will be entitled to a hearing before a British judge and to full rights of appeal to higher British courts. It is therefore not a question of people being lifted from this country by foreign police as suggested in the fanciful remarks of some noble Lords. The full legal process will be available in this country. We have already made it clear that, if the alleged crime is not a crime in this country, thank you very much, it will not apply.

Lord Kingsland: My Lords, when the Minister introduces his implementing Bill in July, will he undertake to your Lordships' House to include a clause prohibiting extradition unless a judge in this country is satisfied that the criminal procedures of the receiving state comply with Articles 5 and 6 of the European Convention on Human Rights?

Lord Rooker: My Lords, I do not want to play with words, but I sincerely hope that I will not be introducing a Bill in this place in July. This summer, the Government are publishing a draft extradition Bill—that is our intention—which will contain the review of extradition law with which everyone is familiar and the European arrest warrant with the intention of legislating in the next Session. I do not know whether the Bill will be introduced in this House or in the other place, but, for my own personal convenience, it may be better if it goes to the other place first. Those decisions have not been made. However, we would not introduce legislation that was incompatible with the European Convention on Human Rights.

Lord Elton: My Lords, we have been assured that the terms of the arrest warrant will be subject to parliamentary approval in the legislative process which the Minister has just described. However, is it not the case that the terms themselves are circumscribed by the European framework decision? Will the Minister undertake that the legislation will be completed before the framework decision makes it impossible for Parliament to assert its will?

Lord Rooker: My Lords, I do not think that I can give the noble Lord the commitment he seeks because I do not have the facts of the negotiations or the relevant dates. However, in introducing the legislation, we shall not seek to short-change anyone of their human rights. I cannot pre-empt the way in which the legislation deals with the terms of the final framework document. However, I realise that the Bill, when it is considered by Parliament, will have to contain an English translation of the terms that the noble Lord mentioned so that we do not get lost in a myriad of crimes which may not necessarily fit our terminology and language, and so that we can understand, in the United Kingdom context, the types of crime we are talking about.

Lord Swinfen: My Lords, does the Minister think that if he were to be tried in another country of the European Union, he would get a fair trial in all member countries?

Lord Rooker: My Lords, I regret to say that I did not catch the first part of the noble Lord's question.

Lord Swinfen: My Lords, I asked the Minister whether, if he were to be tried in another country of the European Union, he thinks he would get a fair trial in each of those countries.

Lord Rooker: My Lords, I hope that that is a purely hypothetical question to which I shall not attempt a hypothetical answer.

Prison Overcrowding

Lord Elton: asked Her Majesty's Government:
	What action they are taking to address overcrowding in prisons.

Lord Rooker: My Lords, the Question standing in the noble Lord's name on the Order Paper today is not the same as yesterday's. Given that it is a topical Question I register a protest as civil servants work their socks off in a very short time to provide briefings for Ministers. Although I accept that the subject still relates to prison overcrowding, the Question is not the same as yesterday's. Therefore, I intend to answer the Question as it was originally tabled.
	The Prison Service is aware of the increasing risks to control and continues to monitor the situation closely. The Government will provide the places necessary to accommodate safely and securely those sentenced by the courts and have recently announced in the Budget funding to build 2,320 places at existing prisons. A further 1,290 places will be provided by the new prisons which are planned at Ashford, near Heathrow, and at Peterborough. There is a programme of other activities to try to reduce the prison population.

Lord Elton: My Lords, in thanking the Minister for that reply I must say in parenthesis that the Question is, I think, in the terms in which I tabled it. There was a "double shuffle" by the authorities, who thought that it was not sufficiently clear, but that does not concern us this afternoon.
	I thank the noble Lord for his Answer. Does he regard the measures he has just described as somewhat short term? Does he not agree that even criminals start life as children? As he so well understands the power of the Treasury to influence policy, will he point out to his right honourable friend at the Exchequer the cost-effectiveness of diverting children from getting mixed up in crime at the beginning of their lives by core funding more voluntary agencies that understand this work and whose staff and members are dedicated to it?

Lord Rooker: My Lords, I absolutely accept that the idea is to stop people going to prison in the first place by stopping them committing crimes. But if they do commit crimes, we are absolutely firmly committed to take the line that serious criminals will go to prison. As we all know, not all of the 70,575 people who are currently in prison are serious criminals. We all understand that. I might add that at the present time 10 per cent of the prison population is composed of foreign nationals. We do not have enough repatriation programmes, which is another matter on which we are working.
	I point out, as I think I did recently, that, although it is not in the voluntary sector, the Youth Justice Board ran its "summer splash" programmes in over 100 schemes last summer in the most deprived areas of England and Wales with the support of local communities, the voluntary sector and the police. Some 20,000 young people were kept off the streets. It was estimated that in the estates where the "splash" schemes ran there was a 36 per cent reduction in domestic burglary and an 18 per cent reduction in youth crime. The points that the noble Lord raises are absolutely bang on in the sense of stopping people going to prison in the first place, particularly the younger element as the prison population is skewed towards the younger element. However, the fact of the matter is that the Government are duty bound to provide the places required by the courts which send people to prison.

The Lord Bishop of Durham: My Lords, I am glad that the Minister has just raised the question of the younger element, as a high proportion of the younger element are in prison on remand. What steps are being taken to shorten the time in which people are kept in prison on remand, which must have a direct relevance to the original Question?

Lord Rooker: My Lords, we are trying to speed up the process in the criminal justice system. I regret that off the top of my head I cannot give the right reverend Prelate a figure for the total on remand although I suspect that I have it somewhere. It is obviously too high. People are usually held on remand for good reasons but sometimes we all read about cases, on which it is best not to comment, where there does not seem a good reason why those people are held on remand.

Lord Ackner: My Lords, does the noble Lord agree that the present rate of overcrowding makes the proposition so often repeated entirely valid; namely, that this is a very expensive way of making bad people worse?

Lord Rooker: My Lords, I agree that it is expensive. It would be even more expensive if we had to use police cells, for example. However, we are looking at increasing the capacity. We are even looking at purchasing another floating facility. The issues have to be dealt with. While the courts are sending people to prison and more criminals are being caught, the Government are duty bound to provide that capacity. But we have to consider sentencing policy and we shall be bringing forward legislation in the next Session on sentencing policy. Therefore, I suspect that we shall have full and frank debates on that issue in the next Session.

Lord Dholakia: My Lords, can the Minister explain why when the crime rate went down between 1995 and 2000 the prison population went up? As he has been robust in commenting on sentencing policy from time to time, has he discussed with his colleagues why we have so many people on remand in custody, why we have mentally disordered offenders in our prisons and why we imprison so many women and children? Has he looked at the case of Mrs Amos, who has been sentenced to imprisonment for the truancy of her children?

Lord Rooker: My Lords, I have not looked at that case because, frankly, it is sub judice. I understand from the news this morning that there was a court hearing today. I should love to comment on it but I cannot do so as it would constitute interference with the process. I said earlier that we all hear of cases where remand is rightly used and of cases where remand is used in inexplicable circumstances, particularly if the original prison sentence has caused a change in behaviour, which it does in some cases. I repeat the point I made earlier; namely, that there has been a large increase in the female prison population which we have discussed before. As I have already mentioned today, there has also been a substantial increase in the number of foreign nationals in the prison population. Some 10 per cent of the prison population is composed of foreign nationals. One country accounts for a third of that total. Nearly 90 per cent of those foreign nationals have been accused of having committed offences which are drug import or drug export related.

Questions for Written Answer

Lord Peyton of Yeovil: My Lords, I beg leave to ask the Leader of the House this Question. Will he take action to reduce the inordinate length of time during which Questions for Written Answer languish on the Order Paper without response? There are some 500 or so at the present time. Will he suggest to the Procedure Committee that noble Lords wishing to put down such Questions should in doing so specify the department which they believe to be responsible for the matter raised?

Lord Williams of Mostyn: My Lords, the noble Lord, with his usual courtesy, gave me notice of this matter. I know that it is a matter which has concerned in particular the noble Lord, Lord Jopling, because we have been in correspondence about it.
	The complaint made by the noble Lord, Lord Peyton, is well justified. It is a long-standing problem. I shall just outline to your Lordships what I am trying to do by way of dealing with it. Last June I realised that it was long-standing and I decided to take on responsibility for overseeing the process. At the moment at every Front Bench meeting I vigorously complain to my erring colleagues. Sir Richard Wilson has written to all departments reminding them of the need for timely and helpful Answers to parliamentary Questions in both Houses. One of the problems which is correctly identified by the noble Lord concerns departmental turf disputes about whose responsibility a Question is. To deal with that we have established a computer database in my office. This will make the allocation process clearer and more prompt. I think that the changes are starting to work.
	In response to the representations of the noble Lords, Lord Jopling and Lord Peyton, I have asked the House authorities to look into the feasibility of the suggestion that has been made. The Clerk of the Parliaments is helpfully preparing a paper for the Procedure Committee. I wish to give a further word or two of background. There is a large number of Questions. At the moment 45 Questions are over the 21-day period and 53 are over the 14-day period—that is not acceptable. However, 4,376 Questions have been tabled. I think that we are improving but there is a good way to go. I hope that the noble Lord finds my Answer helpful.

Lord Peyton of Yeovil: My Lords, the noble and learned Lord leaves me nothing at all to say except to thank him for his courtesy and to say how much I appreciate the attention that he has given to the matter.

Business of the House: Debates, 21st May

Lord Williams of Mostyn: My Lords, I beg to move the first Motion standing in my name on the Order Paper.
	Moved, That Standing Order 40 (Arrangement of the Order Paper) be dispensed with on Tuesday 21st May to allow the Motion standing in the name of the Lord Privy Seal to be taken before that standing in the name of the Lord Hunt of Kings Heath.—(Lord Williams of Mostyn.)

On Question, Motion agreed to.

Business of the House: Debates this Day

Lord Williams of Mostyn: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
	Moved, That the debate on the Motion in the name of the Lord King of Bridgwater set down for today shall be limited to three-and-a-half hours and that in the name of the Lord Fowler to two hours.—(Lord Williams of Mostyn.)

On Question, Motion agreed to.

Religious Offences: Select Committee

Lord Tordoff: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Perhaps I should apologise to the House for the somewhat abrupt way in which I withdrew the Motion yesterday. One is in a difficulty in this regard. There was a mistake in the Motion. I offer no prizes to those who can find out what it was. Having said, "Not moved", I am not allowed to explain why I said that. But today I am pleased to move the Motion.
	Moved, That a Select Committee be appointed to consider and report on the law relating to religious offences;
	That, as proposed by the Committee of Selection, the following Lords be named of the Committee:
	L. Avebury, L. Bhatia, L. Clarke of Hampstead, V. Colville of Culross (Chairman), L. Grabiner, L. Griffiths of Fforestfach, E. Mar and Kellie, B. Massey of Darwen, B. Perry of Southwark, Bp. Portsmouth, B. Richardson of Calow, B. Wilcox;
	That the Committee have power to appoint specialist advisers;
	That the Committee have power to adjourn from place to place;
	That the Committee do meet tomorrow at 4 o'clock in Room 134, Millbank House.—(The Chairman of Committees.)

Lord Peston: My Lords, is it possible for the Chairman of Committees or the Committee of Selection to set before your Lordships the criteria that were used in deciding who would sit on this committee? In particular, can we be assured that all ranges of opinion, including those who regard the concept of a religious offence as nonsense, will be represented on the committee? That would assure us that the committee will meet the usual high standards of your Lordships' House and approach this matter in a totally objective manner.

Lord Tordoff: My Lords, the noble Lord has answered his own question. Committees of this House approach matters in an objective fashion. It may not be possible for all shades of religious opinion—and none—to be included on a Select Committee; that would involve a Select Committee of several thousands. I am sure that all views can be presented to the committee, from whatever quarter they come. I have every confidence that the Chairman and Members of the Committee will approach the subject in a thoroughly impartial way.

On Question, Motion agreed to.

Armed Forces

Lord King of Bridgwater: rose to call attention to the Armed Forces of the Crown; and to move for Papers.
	My Lords, I regard it as a privilege to move this Motion. We are sometimes asked, "What is the House of Lords for?". Anyone who has studied the speakers' list for this debate will have one answer. The defence of our country is not a devolved matter. It is a central responsibility of these Houses of Parliament. Anyone who is familiar with the other place will be aware that at the moment there is, sadly, very little experience of defence and our Armed Forces, despite the noble efforts of the Armed Services Parliamentary Scheme to try to remedy the situation. The speakers' list shows that no fewer than four former Chiefs of Defence Staff are due to speak.
	I am absolutely delighted that my noble friend Lord Black of Crossharbour, who has considerable international experience, will make his maiden speech. I am merely the opening bat in what I hope will be a much more distinguished batting line-up to follow. In the time that is allotted to me—I appreciate that I have longer than other noble Lords—I will not be able to do more than sketch in some of the matters that I hope other noble Lords will develop.
	In light of that, I hope that the Government will listen. This is not the most experienced team of Ministers that the Ministry of Defence has ever had. I say that with great respect to the Minister and mean no offence by it. They have our good will because they are charged with exceptionally difficult times. I hope that other Ministers, including Ministers in another place, will consider not necessarily my comments but the contributions of other noble Lords. This debate should be read in Hansard; I am sure that noble Lords will make important contributions.
	I turn to the responsibilities that we in this House have for our Armed Forces. Ministers of the Crown in recent times have committed our Armed Forces in response to increasingly hazardous and uncertain events. They are entitled to our attention and our warmest praise and admiration. The whole House will join me in recognising that when events have arisen unexpectedly in countries and in situations for which we were unprepared, on each occasion we have asked the Armed Forces to undertake various assignments and they have, without exception, carried them out with great courage, determination and organisation, which has excited the admiration of our friends and allies and the respect of the world.
	Ten years ago I handed over my responsibilities, when we were reducing our forces in Germany and anticipating withdrawing from Hong Kong. It appeared that the claim, "Join the Army and see the world", was becoming a pretty limited proposition. There was some presence in Germany, commitments in the Falklands, Cyprus and Gibraltar and continuing obligations in Northern Ireland, but that was about it. No one anticipated that we would find ourselves, 10 years later, also in Bosnia, Kosovo, Turkey, Sierra Leone, the Congo, East Timor and Afghanistan—and possibly in Nepal before too long.
	The commitments that have been placed on our Armed Forces have common characteristics. I believe that I am justified in saying that, without exception, those events were unanticipated and that our commitments always last longer than originally anticipated. That leads to the vexed question of stretch. How much are we entitled to ask our Armed Forces to do? How much are we entitled to expect of them in what might laughingly be called peacetime? I say that in view of the state of parts of the world, absences from families and commitments in many different parts of the world.
	One difficult issue—it was a common problem in Northern Ireland—is the tour interval. That is the gap between unaccompanied tours and periods when the Armed Forces are on normal regimental and other duties in the unit; when they are in married quarters with their families. When they were on unaccompanied tours, one tried to ensure that the gap before the next tour was regular and significant. I accept that the tour interval now appears to be better; there has been some achievement in that respect. However, as I have said to the Minister previously, one of the problems with tour intervals in my experience is that one looks at units. The trouble is that if those units are under strength, and if people are being borrowed from other units, a major logistical exercise is involved in spotting how many times someone in a unit may be asked and—this is the great military tradition—be willing to undertake exceptional additional duties. Key activities, such as signals, have been under considerable strain. The people who do not overlook that—they are all too aware of it—are the wives and families. One depends on those key people to keep returning and making up the numbers in those key assignments. If too great a load is put on them, slowly the vital core of our Armed Forces—their calibre and quality—will be undermined.
	I hope and believe that recruitment is better. However, recruiting new recruits—privates—to the Armed Forces is one thing; the question is whether one can keep one's majors, captains, sergeant-majors and sergeants, who are the central skeleton of the corps. The same consideration applies to similar ranks in the other services; I apologise if I talk entirely in Army terms. I say to the Government that I hope that the situation is being watched very carefully.
	One admires the Prime Minister, if that is the right word to describe one's response to his speech at the party conference when he appeared to be wishing to solve all of the problems of Africa and bring peace to the world. However, we have a limited resource. I profoundly believe that we are a force for good in the world and I am proud of what our country is able to do. However, there is a limit, and if it is not observed, the quality and calibre of our forces will be undermined.
	Of course, while we are a force for good and can be on our own—and, on occasion, must be on our own—how much better it is to be in an alliance. Of all the alliances with which we are involved, that with the United States is absolutely critical. We have a particular responsibility because we are one of the few nations that is compatible in a significant way with the United States and its forces.
	My concern is that we may not sustain our technical investment or appreciate the importance of keeping up to date with modern technology and equipment, which noble Lords have seen deployed to amazing effect in Afghanistan. If, in addition, we cannot keep up with some of the real-time intelligence capabilities and understand the processing of that intelligence—in other words, if we become incompatible—then we shall not be able to provide adequate and proper support in the most important of our alliances.
	I am sure that many of your Lordships share the concern that exists about the current relationship between the United States and Europe. There is, in a real sense, a crisis in United States/European relations. I do not believe that many people in Europe understand the strength of feeling that exists in the United States about the appalling hurt and outrage which the people of that country suffered on 11th September. I do not believe that they understand that there is a feeling that Europe does not sympathise sufficiently with the people of the United States or that it is not sufficiently willing to support them in their efforts.
	The world's only superpower is deeply hurt and angry and is determined to fight back. It has done so through the destruction of Al'Qaeda bases and the success of its efforts in Afghanistan. Anyone who visits the United States at present will note a palpable sense of power and a sense that its people can correct many of the evils of the world. That is a fairly heady mixture and it needs to be handled with great care. We are one of the United States' best friends and allies, and we need to keep in very close concert with that country in considering the best way to proceed.
	I pay tribute to the amazing success of the Afghan campaign. There is no doubt that the United States, aided by its allies, has recaptured the initiative from Al'Qaeda. Before the events in Afghanistan, it appeared that Al'Qaeda had the initiative and that the world was on the defensive. Undoubtedly the impact and scale of the US offensive against Al'Qaeda and the Taliban have led to it recapturing the initiative.
	I hope that we have now succeeded in denying Al'Qaeda a base for training and operations. I hope also that the clearest warning has been given to a number of other host countries, which might have been relaxed about having these terrorist elements within their territories, to consider that much more carefully. I believe that time has been bought for the fledgling Afghan Government to become better established. However, more recent events worry me. Are we seeing the beginnings of the classic guerrilla situation in which one can operate from a neighbouring territory without being under great pressure because of the nature of the terrain and can thus continue a successful terrorist campaign?
	It is against that background that I gain the impression that a rather more sombre reassessment should be made of the question of any attack, incursion or aggression against Iraq. Clearly the conduct of Saddam Hussein is unacceptable. His development of weapons of mass destruction—whether they be biological, chemical or attempts at nuclear—are unacceptable. His refusal to allow in UN inspectors is unacceptable. But this situation needs to be handled very carefully and it needs to be thought through. The fragility of the situation in the whole region of Israel and Palestine, the change of attitudes in Saudi Arabia and the Gulf, the current concerns of the Turks and Turkey's nervousness over the situation, and the evidence of Al'Qaeda involvement in Kurdish areas at present, possibly stimulated by Saddam Hussein, are all part of a dangerous cocktail.
	In these dangerous times we must ensure that, if we are to play our part in whatever direction the situation takes, we keep up our own capabilities. Perhaps I may cite one particular area of concern. I believe that the Government were very foolish in relation to the reduction in the size of the Territorial Army. I remember that when the SDR was produced it identified with extraordinary precision the future role of the Territorial Army. I shall always believe that one of its key capabilities should be a general availability of trained military manpower. The recent suggestion that it might play its part in homeland defence—whether or not that is realistic—demonstrates how quickly new tasks might be required for which its resources will be needed.
	Therefore, if we are to sustain our commitments and take on the wider role, which I believe this country is prepared to do, of trying to make the world a safer place, that will need the resources to carry it through. Of course, no matter what defences we have or what the scale of our military resources, there is no guarantee of total security. If 11th September showed something, it was not only the cunning and ruthless determination of terrorists; it was the vulnerability of modern society. A shock went around the world as people realised the dangers of such terrorist attacks and the implications that they could have. We must be good and ready for the unexpected. We should consider the history of our country. The events in the Falklands, the Gulf War and Afghanistan were all unanticipated. None was predicted, but suddenly we found ourselves in those situations.
	If we need one thing in addition to strong, well-trained and well-equipped Armed Forces, it is first-class intelligence. We must ensure that during these times of difficulty and danger our intelligence agencies are properly maintained and supported. They are the strongest single element in our link with the United States. They are a very important card in our relationship and in the maintenance of our close relations with that country, and they must be sustained.
	These are dangerous times. While we must ensure that we take all possible steps and precautions, an absolutely key element in that will be the proper provision of resources and support for the Armed Forces of the Crown. My Lords, I beg to move for Papers.

Lord Desai: My Lords, I echo what the noble Lord, Lord King, said and pay tribute to our Armed Forces. As the noble Lord rightly said, they have been asked to perform a variety of very difficult tasks in difficult terrain against enemies of different strengths, and they have performed marvellously. I believe that we should be proud of their flexibility and of the depth of their performance. Despite all the problems that we may discuss later, our Armed Forces have performed better than our highest expectations.
	Before I proceed, perhaps I may say how much the House is looking forward to the maiden speech of the noble Lord, Lord Black. I apologise to him. I shall not be present when he speaks because I have to be out of the Chamber. I have a pre-arranged appointment and I apologise. However, I shall read his speech in Hansard tomorrow with great care, and no doubt I shall learn a great deal. One thing that defines me in the long list of speakers is that I am the most ignorant on the subject of defence. Long may I maintain that distinction!
	Following on from what the noble Lord, Lord King, said, it is clearly the case that, in terms of our defence forces, the unexpected always happens. To that extent, it is not possible to plan ahead for certain kinds of battles or strategies. We cannot be like the German Army, which, before the First World War, had detailed train timetables prepared for when they were going to march.
	That is where the strength of our strategic thinking lies. Noble Lords are more aware than I am that that strategic thinking has to include how to achieve Armed Forces that are capable of rapid response in unusual and unexpected situations. That rapid response strategy, which has developed, was debated in previous White Papers and is vindicated by our experience, especially since 11th September.
	In the long list of theatres of battle mentioned by the noble Lord, he did not say anything about Palestine. Presumably, before long we shall be in Palestine as well, perhaps being shot at by both sides. We shall need to be careful how we cope with that situation. While I agree with the noble Lord, Lord King, that there is always the danger of stretch, the flexibility and the ability to turn matters around rapidly is also present now. That is helping us. It helped us to land marines in Afghanistan while, at the same time, not having to withdraw troops from any other places.
	A few weeks before the spending review is a good time to debate the Armed Forces. I am sure that my noble friend on the Front Bench will appreciate that, while I praise the Armed Forces, we need more resources. We must never forget that although all noble Lords may be in favour of greater economy in all spending departments, one of the most important public services is that provided by the Armed Forces. When we talk about the state of the public services, we must not neglect the Armed Forces, which provide one of the most vital public services of this country.
	I believe that when my right honourable friend the Prime Minister spoke at the Labour Party conference about our responsibilities in Africa, he did not imply that our only responsibility is in regard to deploying Armed Forces. We must also act on debt relief, on poverty alleviation, on combating disease and on avoiding conflict, as the Department for International Development does. We do not have to wait for the time when armed forces from Britain or the United States have to be deployed in order to sort out a situation of conflict.
	In our policy decisions we must remember that we shall always have global responsibilities. That is unavoidable. We shall not be able to withdraw from global responsibilities, because that is part of our position in the world order. I believe that we—more than the United States—will be responsible for non-military interventions on the human development front which may help to avert problems. We must be quite clear that the responsibilities that the Prime Minister promised that we would bear are responsibilities that we cannot evade. We must ensure that we economise on the use of the Armed Forces by being active on other fronts so that as far as possible the Armed Forces are used only as a last resort and not as the first resort.
	I believe that a division of labour is emerging between the USA, this country and Europe. The USA favours direct military intervention, for which it has the capacity and the equipment. Although we shall help, the European nations will be called upon to do the washing-up afterwards. The activities of nation building in Afghanistan or problems of settling the Palestinian/Israeli problem through non-military means, and so on, should be tackled by European nations with this country playing the pivotal role on both the military and the non-military fronts.
	While more recruitment into the Armed Forces would be welcome, in years of full employment that is not an easy task. That has always been the case. I quite agree that we should be able to recruit better paid and more skilled people into the Armed Forces, but at the same time we have to remember that our primary responsibility is to act on other fronts so that wars do not happen as often as they have in the past.

Lord Mackie of Benshie: My Lords, I am grateful to the noble Lord, Lord King, for introducing this debate and for doing it so well. I wondered what I would say on this important subject. I thought that my experience of 60 years ago would not be particularly useful, but some things do not change, such as the necessity for dedicated and able people in the Armed Forces.
	In times of war people will put up with anything out of patriotic duty, but in normal times the services must compete to employ the best people. "Join up and see the world", as the noble Lord, Lord King, quoted, is completely out of date. Previously, families could go to Hong Kong or to Germany where they had enjoyable experiences. Now people are torn away from their families, as the noble Lord, Lord King, said, to serve in strange places for quite a long time.
	I have mainly considered the position of the RAF. I have contacted various friends who run stations and such places. On every occasion I received the same complaint—a lack of skilled people. The loss of pilots and aircrew can be serious, and the situation will not always be alleviated by the depression currently affecting airlines. The problem will arise again when the airlines are again competing strongly.
	I have no doubt that the Minister will correct me if I am wrong, but my inquiries reveal that bonuses offered to pilots to stay on in the RAF for a 12-year period appear to amount to quite a handsome sum. A typical figure is £35,000. That is not a great amount when one considers training a replacement pilot. The cost must be well over £250,000. Ministers should point out to the Treasury that trying to save money in that way leads, at the end of the day, to spending more.
	The RAF does not pay a bonus to skilled tradesmen whose potential is realised only when they have served about two years. Training them must cost about £100,000 but many leave after an initial period to take up well paid jobs in manufacturing industry. The forces should try to keep those people by paying them a bonus to stay in the services.
	Home life is very important. In many cases the wives—I should perhaps say "spouses", but we are talking mainly about servicemen—have highly skilled and highly paid jobs and cannot move easily from the area. That brings a whole range of problems that must be addressed if we are to attract the people we need.
	In considering further issues and wondering how to discover more about them, I suddenly realised that this House contains probably more top NCOs than any other single place. I refer to our Doorkeepers. I talked to a number of them. They said some interesting things. They mentioned the great irritation on the part of skilled people in the RAF in relation to Options for Change, which cut the number of skilled people doing jobs in the RAF and put the work out to private firms. That must be much more expensive at the end of the day. In farming and other businesses, when something is contracted out, it costs a great deal of money.
	It is essential to address the points I raise if our Armed Forces are serving all over the world. We must have people who are satisfied with their jobs; who are willing to go off for short periods, but who also expect to have a home life; and who will be paid the reward they deserve and that is needed to keep them in the services. The subject is very narrow but it applies throughout the services. I hope that the Minister will discuss it.

Lord Craig of Radley: My Lords, I too join in thanking the noble Lord, Lord King of Bridgwater, for introducing this important subject today.
	In the course of the debate that we held on Afghanistan just before Easter, the Minister, in his winding-up, drew attention to the number of equipment purchases and developments in the procurement field that the Ministry of Defence had made—all very creditable. But that was in answer to points I had made about the reductions, forced by a lack of resources, in front line strength.
	I had particularly drawn your Lordships' attention to the planned loss of the air defence capability of the Sea Harrier force, and the risks that that would mean for the fleet. Since I spoke, that issue has been given a great deal more exposure in debates in the other place and in the media, underlining its importance. It has been well aired, so I do not intend to say more about it, save to ask your Lordships to note how widely shared are my concerns. But it is not only that particularly critical capability that is to be lost. There are other reductions across all three services.
	It is sobering to realise that the front line strength of the Royal Air Force has dropped from almost 60 squadrons when I was Chief of the Air Staff to 44 today. That is a huge cut over the past 15 years. Twenty-five per cent of the offensive air power we had planned for after Options for Change has gone, and it seems gone for good. I do not think that anyone could argue that the tasks and commitments faced today have been cut by anything like an equivalent amount. Indeed, we seem to be further committed than ever and the elastic just gets stretched more and more.
	In Afghanistan there is a far higher proportion of our front line involved than that of any other nation—far higher relatively even than the Americans. There are other commitments for our forces around the world. Our capabilities are very thinly stretched and there is little or nothing in reserve to make good any major setback or loss.
	I have another concern which, while not so eye-watering as the loss of front line units, is none the less vitally important to the operational capability of the three services. I return to the point the Minister made about the procurement of advanced new weapons systems. It is self-evident that service personnel must train and develop the required skills and tactics to make the most effective use of these new systems and weapons. They must be given the opportunity to train and work up with them before they are committed to battle. I shall be grateful if the Minister can say something to reassure your Lordships about the levels of training that are now being provided.
	All services and roles have their own particular needs. One of the most demanding is that of front-line aircrew. Fast jet pilots need an absolute minimum of 18 to 20 hours flying per month, depending on their role and the weapons systems concerned, if they are to achieve and maintain their operational expertise. The provision of new smart weapons but without full and complete training and preparation for their use—this of course involves ground crews as well as the aircrew—before crews are sent to a combat zone would be ridiculous folly. We are all conscious of the tragedy of civilian casualties, to say nothing of the damaging adverse publicity caused when a bomb lands wide of its intended target, or there is a fatal blue-on-blue engagement.
	Other training considerations apply to the transport helicopter and tanker forces supporting operations at great distances from their home bases. They have been flying way above their peacetime budgeted rates, and so their crews must put in considerably greater numbers of flying hours than is normal and their aircraft need additional spares and engineering support. Unless all that additional activity is fully resourced, the only alternative is to cut back severely on the training and preparation of the crews and servicing personnel who have not begun their operational tasking. When they do move to the theatre of operations, they are not as well prepared for their tasks as they should be.
	With the three services active now in a number of different theatres, the Royal Air Force operating over Iraq, in Afghanistan and elsewhere, there is a requirement for more resources to sustain our operational capabilities over time. During the Gulf conflict additional resources for urgent operational needs were readily forthcoming. I remember being delighted that it was proving possible to get approval in days for modifications or new equipments that would have taken years to achieve in peacetime. It ensured that the front line forces were getting a really fast response to their latest and urgent needs. All were surprised and indeed delighted. It was good for morale and it was excellent for the fighting capability when it was eventually brought to bear. I do not hear so much about a speedy response happening like that today, and that in spite of the various smart new procedures that have been greatly vaunted by Ministers.
	The real difference, of course, between the Gulf experience and that of today was that the ultimate paymaster was not the Treasury and Her Majesty's Government, but the Arab and other states that had pledged cash rather than troops for the fight to boot the Iraqis out of Kuwait. What steps are Her Majesty's Government taking to persuade those who are not actively fighting global terrorism to help finance those who are? Perhaps the Minister can give us some encouragement on that so that our troops and aircrew, groundcrew and others involved, will know that what they are doing is backed by the world community and not just by their own Government. There can be no justification for not providing for the full operational needs of our fighting services. If they are to be so heavily committed, the money needed must be made available. I hope that the Minister will reassure the House on that in his response.

Lord Black of Crossharbour: My Lords, it is a privilege to be here. After the tortuous course that I pursued getting to your Lordships' House I would be remiss if I did not thank the former Leader of the Opposition and the Prime Minister for their kind persistence on my behalf. I should also like to thank the officers and staff and many of the Members of your Lordships' House for the many acts of thoughtfulness that have been shown to me.
	I shall speak, if I may, on the point that is the most important element of the defence of this country and has been for over 60 years, building slightly upon the remarks of my noble friend Lord King of Bridgwater; that is, the alliance with the United States.
	As was mentioned in your Lordships' House on 8th May, the reason that the queue to join NATO is so much longer and more demonstrative than the queue to join the European Union is the advantage of a military alliance with the United States, of which it is a truism to say that it is more prominent than any country has ever been since the rise of the nation state and today possesses more military power than all the other countries of the world combined. In those circumstances, the advantage, especially to an east European country with a long and troubled history of territorial disputes and of having its frontiers effectively regarded by the Government and people of the United States as of equivalent importance to the frontiers of the United States itself, is obvious.
	Unfortunately—I speak as a publisher of newspapers in the United States as well as in this country—there is a growing fear among informed official and public opinion in the United States that the definition of the alliance of many European statesmen and commentators is more one of rivalry with the United States than of alliance with it. I emphasise that that is despite the best efforts of Her Majesty's Government, which are much appreciated by everyone in the US who is involved in such matters.
	By way of illustration, your Lordships will recall that there was an exaggerated fear in advance of the American abrogation of the Anti-Ballistic Missile Treaty and, as my noble friend Lord King of Bridgwater said, of anticipated military action in Afghanistan. There was an exaggerated response to early reports of treatment of prisoners at Guántanamo and unfair irritation at what was perceived by many to be American failure to impose irresistible pressure on Israel after what was mistakenly initially believed to be a massacre of more than 500 people at Jenin. I shall not go into that terribly intractable issue, other than to say that there is a suspicion in the US that the attempt in many places in Europe and among reasonably friendly Arab countries to link the campaign against terrorism with progress on the Israeli-Palestinian question is not entirely legitimate, given that the two issues are only tenuously connected.
	I must tell the House that the perception in the US is that, despite the best efforts of many, the general contribution of most Europeans to the Middle Eastern peace process has been to await an American position and then take up a position more friendly to the Arabs. That may often be objectively correct policy, but it creates a good many frictions and does not in the end contribute a great deal to the peace process. I am merely recounting critically and neutrally certain tensions that I think that it is in the interests of this country to continue to do its best to resolve and ameliorate.
	The initial response after the September 11th atrocities in Europe, as in all civilised places, was one of horror and solidarity with the Americans. But there is now a perception of a desire on the part of Europeans for a form of collegiality somewhat replicating the arrangements during the Kosovo activities, during which all of the allies effectively had a right of veto over military responses. Given the extreme provocation to which the US was subjected and given the immense force that it disposes, obviously no such response is acceptable to it. But the allegation against the United States of unilateralism is unjust. Given the gravity of the provocation and the strength of that country, I cannot imagine any country behaving more judiciously, more moderately and yet more effectively than has the United States during the past eight months. That has received inadequate recognition in many sections of the media in Europe, including some sections of the media in the United Kingdom.
	As I see it, the relevance of that to the subject of this debate is that if the United States feels that, ultimately, Europe—or much of European opinion—is perilously close to a state of neutrality between the United States and Iraq, which every respectable government in the world recognises as a lawless and dangerous country under its current regime, the United States is apt to conclude that the alliance is of diminished use to it, even though, as we all know, it is the most successful alliance that there has ever been. That would be a tragedy. The western alliance has served us all marvellously and it is hardly necessary to say that if it were to founder on such an issue the fleeting gratitude of the Iraqis, Iranians and like-thinking regimes would be a poor consolation for the end of the continued formal association of Britain and Europe with the United States.
	Her Majesty's Government have been exemplary in attempting to conciliate the different interests in play, but I respectfully urge them to redouble those efforts. Of course there is a need and a place for a redefinition of NATO's role. Broadly speaking, I assume that it will take the form of some sort of definition of the civilisation and values that, in general terms, we all share; extending the alliance to all those who share those values, without any jingoism or animosity toward those who do not; and unreservedly to protect—to lock arms and join in the defence of—those values when they are attacked, as they severely were on September 11th last year.
	I submit that, as my noble friend Lord King of Bridgwater said, there is no more important issue in the defence of this country than the retention and strengthening of our alliance with the United States.

Viscount Slim: My Lords, as is the custom of your Lordships' House, it is a great privilege for me to congratulate the noble Lord, Lord Black of Crossharbour, on his maiden speech. From the depth of knowledge and strategy that he demonstrated, we know that we have among us a noble Lord from whom we want to hear much more. He has run great enterprises—major enterprises—and from what we have heard today, if anyone knows what is happening in Washington he probably does.
	In this jubilee year, the noble Lord has most kindly, with His Royal Highness Prince Philip, agreed to raise money for the British Commonwealth Ex-Services League, which has issued an appeal for £5 million. Throughout the 54 nations of the Commonwealth today there remain 150,000 veterans, out of a total of about 5 million who fought for us in our time of need, living in dire poverty and needing our help. That shows the good of the noble Lord, Lord Black. We hope to see him here often. I congratulate him on a marvellous maiden speech.
	Looking at the Government and the military today, I see a spear—a narrow-pointed spear. On that spear, I see nothing but green or red berets. Great as those two formations are, and wonderfully though they have done, the base should be broadened. We have great regiments and great battalions whose forebears fought on the frontier of Afghanistan, climbed those hills and picketed them without the help of helicopter support. They were tough chaps, as are today's fellows.
	But we are in danger of having a first and second eleven unless the Ministry of Defence and service chiefs act to make certain that some of those fine regiments are made ready for battle, in the same way that the Royal Marine Commandos and the Parachute Regiment have been. After all, what they are doing in Afghanistan could be done by a normal, well trained, battle-trained infantry battalion. There will be trouble with morale in the ranks unless measures are taken to that effect.
	I am concerned about all the talk of how Afghanistan has been a great victory so far. I have some slight experience of guerrillas. I know that when things get tough for them—as we have seen—they fade out of the battle zone and go to friendly places or hide. They re-group and set about new tasks. When they feel that everyone has gone to sleep and things are better for them, they return. Some of the statements about how the Taliban are finished should be treated carefully. Afghanistan is their homeland, and they will return one day. I hope that we are ready for them when they do.
	The noble Lord, Lord King of Bridgwater, touched on the problem of sustainability of operations. There is a funny sort of line coming out of the Mediterranean from Hamas, cutting across to Iraq, Iran, Afghanistan, Kashmir and now Nepal, as the noble Lord said. It could possibly run further eastwards. There is a major terrorist problem, and we cannot discount the fact that our nation is at risk of attack. We must be able to sustain an operation. Although past and present governments have stated that troops will stay somewhere for only two or three months and then go home, mission creep has become a real danger. Given our administrative set-up, we are in some trouble as regards long-term operations.
	We have enjoyed some advantages. I am glad to see in his place the noble Lord, Lord Gilbert, a friend with whom I jousted when he sat on the Front Bench. He is right about the aircraft. I have not met a single Royal Air Force officer who wants to fly the Eurobus vehicle, production of which has not even really started yet. The American C17 is, in most people's view, much the better aircraft. I cannot understand why the Government do not increase the rather miserable number—four—of such aircraft that we have at present. I leave that battle to the noble Lord, Lord Gilbert; I am sure that he will talk about that.
	We must indoctrinate politicians and civil servants into the need for a military force—all three services—that is such that, if we go to war, we will win. I do not believe that the real battle has yet arrived.

Baroness Park of Monmouth: My Lords, I have two things to say: the importance of trust for any successful defence policy and the need to ensure that our highly professional and dedicated Armed Forces are both properly resourced and used for their primary purpose—the defence of the realm. Throughout our history, that policy has always included a strong expeditionary element and recognised the need to play a part in rebuilding shattered communities. Our borders have always lain beyond this island, and we have fought wars to bring peace. The question is whether we are matching resources to tasks today: and we are not.
	I am concerned at the systematic national devaluation of defence, reflected in the failure of successive governments to fund it properly. What other department—and some have been, if not profligate, incompetent—is required to produce a 3 per cent saving every year, while receiving pitifully small increases in its budget for people, as distinct from capital expenditure on equipment? If it were not for the superb professionalism of our Armed Forces, we could not have saved the day in Sierra Leone, as 17,500 UN troops—there at immense cost—continue not to do. If we had not been able to offer those troops both to keep the peace in Afghanistan and fight the war against Al'Qaeda, would we be listened to on vital issues affecting our interests in the Middle East and Afghanistan? I think not.
	I am concerned not only by the imbalance between tasks and resources but by the many instances in which the Government have failed to keep faith with the implicit, as well as explicit and wholly natural, expectations of soldiers and their families. There have been too many examples of hope deferred and failed trust. Many Gulf War veterans are still waiting for help after over 11 years. Many service families are still waiting, seven years on, for the upgrading to decent living quarters that was promised by the Treasury on the sale of the married quarters estate. The saga of the Chinook still continues.
	Not least there is the mysterious after-thought in the MoD about the scope and conditions for the ex gratia payments announced in November 2000 for former Far East prisoners. It was said that it had taken so long to make the announcement because the War Pensions Agency had to ensure that the regulations were watertight and no one missed out on payment. Under category D, surviving British civilians who were interned by the Japanese in the Far East during the Second World War were to qualify. Subsequently, in May 2001, the MoD produced a further eligibility criterion—presumably to save public money—requiring proof of a parent or grandparent born in the UK.
	As the noble Lord, Lord Wilson of Tillyorn, has pointed out, that limiting criterion was applied well after the original statement was made. It has excluded a number of honourable and admirable British citizens. I know one of them personally and have the highest admiration for the service that she, like many others, has given the state since. They were all interned expressly because they were British citizens and held British passports. They are now old and frail. Any family records of their grandparents, who would have been born over a century ago, are long lost. We appear to be seeking a mean and despicable saving of money, at the expense of honour and trust. I hope that the Minister will assure us that that wrong will be righted.
	We cannot place too high a value on the trust that the Armed Forces and their families ought to be able to place in their country. It could wear out one day, and we will not be able to play our trump card because the troops will not be there. They will have learnt that loyalty is not valued. Their families are weary of overstretch and the destruction of family life. There is already a serious problem with retention. If experienced NCOs leave, who will train the new recruits? Already, good officers doubt whether they have a serious future in a service that is constantly given new tasks, while being told to refocus its all-too-limited existing resources and even to make a 3 per cent saving.
	The services will never complain; their tradition is, literally, to soldier on. They are highly skilled and, so far, highly motivated. They must not come to believe that they are not valued by their country. I know that the Armed Forces and the MoD are doing all that they can to listen to and work with families through the task force. A veterans' organisations has emerged from the Gulf War veterans' campaign. My concern is that the Government as a whole are prepared to use the forces as part of their political armoury, without being prepared to fight their corner for resources and a proper share of the national cake.
	Over the past few years, the Armed Forces have become highly professional managers. I urge the Government to spend less on the many consultancies that infect the infrastructure and free the considerable sums that they cost to be spent by the services on real priorities.
	It was heartening to see in the press recently an indication that Gibraltar may have been belatedly recognised as an indispensable defence resource—a naval base for future operations in Africa or the Middle East—where we have to retain absolute sovereignty. So far, our treatment of Gibraltar—another question of trust—amounts to no more than using it as a bargaining chip in the FCO's manoeuvres to secure Spain as an ally in EU in-fighting. It is an example of the short-termism of a government who seem incapable of thinking strategically. Here too the issue is trust and fair dealing. I have considerable respect for the Secretary of State and the Ministers who serve our Armed Forces. I believe they fight, and sometimes win, some notable battles behind the scenes for good sense and for the national interest.
	On the other hand, the Government in general, and in particular my favourite friends the termites from the Treasury, are failing to understand the value of a highly professional and loyal asset. They believe they can continue to exploit the efficiency and loyalty of the services for short-term political ends while starving them of resources. Today's soldiers and possible recruits in future are bound to take note of how those who fought in earlier wars are being treated and to draw the conclusion that the nation does not value them.

Lord Sandberg: My Lords, although the debate is in the name of the noble Lord, Lord King, to whom we are very grateful, we should not forget that it was originated by the noble Lord, Lord Burnham, to whom we should also pay respect. I have had the privilege of being on defence missions with him, and I can tell your Lordships that he is a most conscientious and enthusiastic member. I also congratulate the noble Lord, Lord King. We are pleased to have him with us and we look forward to more speeches of the sort he has just made in this House.
	One of the encouraging aspects I have constantly found in various visits to our forces, both here and abroad, is the fantastic esprit de corps. It is most encouraging, and the criticisms that we all level at the Ministry of Defence for this and for that do not seem to have dented the pride which one finds in members of the Armed Forces. It is right for them to be proud, and it is nice to see it.
	With actions in such disparate places as have already been mentioned—Sierra Leone and Kosovo, to say nothing of the never-ending position in Northern Ireland—it should be noted that such conflicts are fought against very different backgrounds. Our forces are always being faced with completely different situations, but they do very well indeed.
	Inevitably this brings us to the issue of overstretch, a word of which we had not heard some years ago. It is often raised here. We have been told that we can cope with it, but I shall be grateful if the Minister will confirm that, despite the continuing number of places to which we send our forces, we can cope. We cannot forget the crucial problems of leave and the necessity of people being released for training.
	As the noble Lord, Lord King, mentioned, it is a great pity that the Government in their wisdom, or lack of it, got rid of the Territorial Army, which had been a great source of strength to us as a back-up to our Armed Forces. It should also be remembered how good it had been for the youth of this country. They had been able to become not amateur soldiers but part-time soldiers, which brought a lot of pride to the country. I am not sure what we can do now, it is all a little late, but I am sure many of us wish wholeheartedly that the Government had not been, in my opinion, so short-sighted.
	My second question relates to communications for our land forces. In the past we have been rather bedevilled by our perhaps correct insistence that our communications systems are our own rather than bought from abroad. I should be grateful if the Minister would enlighten us on this particular emphasis and on the timetable for our forces having a really reliable communications system. In the past we have had a system with the wonderful name of Long Bow and we are now going for a new system called Bowman. I am not quite sure what all these terminologies mean, but I do hope the Minister can tell us that the darn thing will work. That is very important. We really have been behind the times in this, but luckily so have other people. However, it is no excuse for us.
	Another point which I wish to make relates to the tradition of close co-operation which we have had in the past with the older members of the Commonwealth such as Australia, Canada and New Zealand. I hope that those traditions of close co-operation continue and will include newer members of the Commonwealth. There has been an enormous tradition of co-operation between the Royal Canadian Navy, the Royal New Zealand Navy and our own Royal Navy, and one can extend that to the RAF and to land forces.

Lord Marlesford: My Lords, in the past few days we have been pleased to hear of the agreement between the United States and Russia for the scaling down of nuclear weapons. That is clearly good news. However, I believe it is very important to recognise that this is not necessarily a step towards the elimination of all nuclear weapons in the world.
	The fact remains that war between nuclear powers is not possible in practice. I believe that even India and Pakistan probably realise that—I sincerely hope that they do. Nuclear weapons have kept the peace for the past half century and I believe and hope that they will continue to do so in terms of world wars for the next half-century.
	I should like to say a few words about our own nuclear deterrent, because I think there is likely to be an increase in the never-ending pressure for the reduction, or indeed elimination, of our Trident submarine fleet with its nuclear capability. As your Lordships know, we now have four operational Trident submarines, the fourth of these having been commissioned in 2000. The total cost of establishing the Trident capability was some £12.5 billion. Of course, in present world circumstances we would probably not be undertaking that expenditure or be able to afford to do so. But having got the Trident fleet, I believe that we should keep it. One of the reasons we should keep Trident, apart from my earlier point, is its extraordinarily low cost. The total annual cost of keeping the whole Trident operation available for action is some £400 million, which is only 2 per cent of the total defence budget.
	The word "only" implies a comparison. Normally the Ministry of Defence, when putting forward the case for expenditure, often makes comparisons between defence expenditure and expenditure on education, health and other major programmes. I should like to put the expenditure on nuclear deterrence in the context of another comparison. I would suggest legal aid. I imagine that your Lordships are well aware that the total cost of legal aid per year is £1.7 billion. Thus, legal aid costs four times as much as our nuclear deterrent. Indeed, our nuclear deterrent is only just over three times the £130 million annual legal aid cost for those asylum seekers who appeal against decisions reached not to grant them asylum. So I hope that that gives some indication of what good value we get for the £400 million that we spend on our nuclear deterrent.
	Because I think that it cannot be said too often, when the Minister comes to wind up the debate, I invite him once again to confirm our commitment for the foreseeable future to our Trident deterrent force.
	In my remaining four minutes I wish to talk about the position of defence in terms of world expenditure. Our own defence expenditure runs at around £25 billion, which represents around 2.5 per cent of GDP. It is quite convenient that British GDP is £1,000 billion because that makes percentage calculations easy.
	Of course the top five countries in the world in terms of defence expenditure account for no less than 61 per cent of the total expenditure. Britain is number five. The United States is responsible for 36 per cent of the total. This underlines the emphasis placed by my noble friend Lord Black, in a remarkable maiden speech, on the enormous contribution made by the United States to the defence of the world.
	Before the end of the Cold War it could have been said that most defence expenditure was made in the interests of the countries spending the funds. I believe that the major change which has taken place is that much of the world's defence expenditure is now being made for world purposes rather than just for self interest. I should like to suggest that the Government answer three questions. Who provides defence operations? Who pays for those operations? Should they be the same people?
	I raised a similar point some weeks ago when we debated the situation in Afghanistan. Following that debate, the Minister was kind enough to write to me on 12th April because I had discussed the cost of the United Kingdom operations in Afghanistan, which so far is running at around £250 million per year. In the debate I had asked why we were paying for all that. I used the analogy of the Gulf War, where we recovered most of our costs from other Gulf states.
	In his letter the Minister said that:
	"I should also point out that the United Nations established a trust fund by which the International Community may contribute towards the costs of the International Security Assistance Force, although we have no plans to draw upon it at the moment".
	I was rather surprised that we had no plans to draw upon it, but I have now read that the American Under-Secretary of State for Economic Affairs, Mr Alan Larson, in giving evidence to the House of Representatives International Relations Committee, said on 14th March in reference to that fund—it may not still be the case; I should like to know—that,
	"no donor has contributed to date and ISAF is self financing".
	The point I wish to make is that I believe that we need a new approach to the funding of international military operations, in particular when they have been authorised or mandated by the United Nations. I hope that Her Majesty's Government will take the initiative in launching such a new approach.

Lord Guthrie of Craigiebank: My Lords, when the Strategic Defence Review was announced by the then Secretary of State for Defence, the noble Lord, Lord Robertson of Port Ellen, it was rightly praised. In advance of any other country, the Strategic Defence Review announced plans to restructure and produce defence forces appropriate for the times we lived in and ready to face the threats and challenges of the post-Cold War world. But even then there was great concern as regards funding. The defence budget was tight but, provided considerable unforeseen expenditure was not required, the forces could just about manage.
	Unfortunately, as the noble Lord, Lord King of Bridgwater, and other noble Lords have pointed out, the level of commitments has continued to rise. The Armed Forces are now seriously under-funded for what they are being asked to do. The world seems to have become a more dangerous place and we cannot afford to be complacent about the levels of hollowing out within today's forces. Recruiting targets are not being met; ships and regiments are not properly manned; training is being reduced; and equipment is ageing and often not available. So far as defence is concerned, there has been, in effect, disinvestment. All this, I remind noble Lords, has been happening at a time when to many of us it appears that the threats to our security are becoming ever greater.
	We should also remember that most of the operations in which we have been involved over the past few years have been relatively benign; that is, peace support operations. There can be no guarantee that that will always be the case. Within a short time our forces could become involved in much more serious war-fighting operations.
	We understand only too well that defence planning is about taking risks. In my judgment, however, we have been lucky and the risks we are taking now have become very great. The margin between success and failure is now extremely narrow. And success, which we have come to expect and take for granted, along with the lives of our servicemen and women, could be hazarded.
	An increase in the defence budget is needed to address the hollowing out of the armed services. It would also send the important message to the services that their efforts are appreciated by the Government. They have heard the rhetoric and now want defence to be properly funded. They do not want to be asked to go on "making do" the whole time.
	Many servicemen and women are puzzled. They know their own Ministers both in this Government and their predecessors. Their own Ministers understand their problems and strongly advocate their case. But they still feel taken for granted. The Chancellor and the Treasury do not understand, do not listen, and show little or no interest in trying to understand one of the few institutions in this country which is still admired both at home and throughout the world. It may not be so admired for much longer if there is no increase in the defence budget. If the Government want defence to be a force for good—and I hope that they ir own Ministers understand their problems and strongly advocate their case. But they still feel taken for granted. The Chancellor and the Treasury do not understand, do not listen, and show little or no interest in trying to understand one of the few institutions in this country which is still admired both at home and throughout the world. It may not be so admired for much longer if there is no increase in the defence budget. If the Government want defence to be a force for good—and I hope that they ir own Ministers understand their problems and strongly advocate their case. But they still feel taken for granted. The Chancellor and the Treasury do not understand, do not listen, and show little or no interest in trying to understand one of the few institutions in this country which is still admired both at home and throughout the world. It may not be so admired for much longer if there is no increase in the defence budget. If the Government want defence to be a force for good—and I hope that they ir own Ministers understand their problems and strongly advocate their case. But they still feel taken for granted. The Chancellor and the Treasury do not understand, do not listen, and show little or no interest in trying to understand one of the few institutions in this country which is still admired both at home and throughout the world. It may not be so admired for much longer if there is no increase in the defence budget. If the Government want defence to be a force for good—and I hope that they Special forces are not so much about numbers as about capability. We probably have the best and most respected special forces in the world. We should keep them that way.

Lord Moynihan: My Lords, I am delighted to participate in this important debate which affords us the opportunity to cover so many key defence and security issues. As many noble Lords have said, our Armed Forces, who are deployed across the world, from Afghanistan to Kosovo and from Bosnia to Sierra Leone, have an outstanding professional reputation. I, too, wish to pay tribute to our troops for the distinction with which they have served, and continue to serve, in these operations, and to record the deep debt of gratitude which we in this country owe them.
	The quality and readiness of our Armed Forces are recognised as among the best in the world. Yet this is a critical time for our Armed Forces and for our defence planning. The last decade saw efforts to sustain effective Armed Forces with the necessary equipment, training and manpower to meet the challenges of the post-Cold War era. Now the post-September 11th era has presented us with new and difficult challenges.
	One of the indelible consequences of the terrible events of September 11th was the recognition that our security environment has changed. That change must now be factored into our defence planning and policy. Up until September 11th, many thought that we lived in a world with no direct threats to our and American security. We were wrong and we were not prepared. Although, as the noble and gallant Lord, Lord Guthrie, stated, the post-Cold War strategic environment envisaged by the Strategic Defence Review has not transformed completely overnight, nevertheless I would argue that a paradigm shift has taken place. If we wish to continue to play a leading role in promoting international security and stability, it is vital that our defence policy be flexible and able to adapt as the contours of the international landscape change and as we are faced by new circumstances and new threats.
	The Strategic Defence Review, now almost four years old, perhaps did not adequately take into account the threat from international terrorism and the growing likelihood of asymmetric action, and therefore it did not make homeland security a priority. Undoubtedly we will now need to make further adjustments to our Armed Forces, and, indeed, to the structure of policy formulation, in order to take account of these threats.
	The reason we need to consider these issues is that more than 10 years after the collapse of the bipolar world, we find ourselves faced by a bewildering array of complex problems and diverse threats. Cut adrift from the perverse stability provided by the Cold War and the need to contain Soviet power, and faced by a tide of instability and conflict which seemed to sweep across a number of regions in the world over the past decade, we, together with our partners in the UN, in NATO and in the EU, have increasingly addressed the dilemma of humanitarian "wars of choice", the legitimate uses of military force other than in self-defence and the need to maintain peace in divided societies, in a world where inter-state atrocities progressively replaced the old paradigm of intra-state wars—Rwanda, East Timor, Bosnia, Kosovo, Sierra Leone and the Great Lakes region of Africa to name but a few.
	At the same time, major contradictions in global society were also becoming apparent—contradictions between unprecedented peace and prosperity for some and protracted conflict and desperate poverty for others; and between rapid economic globalisation on the one hand and increasing political fragmentation on the other. In a world where globalisation was ensuring that our economies were integrating faster and on more levels than ever before, paradoxically the politics of separatism and nationalism were fragmenting societies and tearing them apart.
	Yet time and time again we have failed to devote the same necessary resources to the resolution of the underlying causes of conflict as we do to the diplomatic and perceived military might used to end the fighting. Beyond the CNN headline-making appeal of waging and winning wars, the making and keeping of a permanent peace through the long, slow process of the restoration of a country or region, the reconstruction of its towns and villages, its businesses and communities, the revival of its spirit and its people were too often neglected.
	Perhaps this explains why we have spent much of the decade in the Balkans, winning the war we had eventually chosen to fight and yet coming too close to losing the peace that we sought to impose, and which, indeed, has still to be won. It is a lesson that I am still not convinced we have learnt, even in the wake of September 11th. It is one that I hope the new chapter of the SDR will address.
	Upon this landscape, September 11th literally exploded and changed that perception overnight. As Ashton B. Carter put it in the journal, International Security:
	"on 11 September, 2001, the post-Cold War security bubble finally burst".
	September 11th has thus opened a new chapter in our foreign policy and in our defence policy. We are now engaged in a new kind of war against a far different kind of enemy from any the country has previously known. Our definition of national security must include homeland security and must strike the right balance between the contribution that our Armed Forces should make to home defence on the one hand and to countering threats abroad on the other.
	While the campaign in Afghanistan has been successful on many levels, we should not forget that it has potentially stopped only one powerful, dangerous and well-financed terrorist organisation. It is a victory indeed, but it is no more than the closing of the first chapter in the coalition against international terrorism. It will not be the end of the story. It does not decrease the threat of attack from any one of the many proscribed terrorist groups which have been born out of hatred and religious fervour.
	Nor does it touch on our wider objective to do everything to eliminate the threat posed by international terrorism. This front of the war can be won only by pooling resources to establish a co-ordinated, unified, military response—indeed, an international response—against terror and the tactics of terror, built on the vital importance of the special relationship referred to by my noble friend Lord Black.
	Military solutions can go only so far in defeating the enemy. The Afghan campaign was a success in that it toppled the sponsors of terrorism, the Taliban. The CIA estimates that only some 25 to 30 per cent of Al'Qaeda cells have been wrapped up. I agree with the comments of the noble Viscount, Lord Slim, in that regard. Intelligence and broad international co-operation are critical to draining the swamp. One only has to think of the September 11th hijackers operating out of terrorist cells in Hamburg. This is a challenge which can be effectively tackled only by a long-term approach that incorporates the full range of civilian and military means at our disposal.

Lord Hardy of Wath: My Lords, the House has made clear that it is grateful to the noble Lord, Lord King, for initiating the debate and for the important contribution that he has made to it. He recognised, as does the rest of the House, that the commitment and endeavour of our servicemen have allowed the United Kingdom to play a responsible part in world councils.
	None of our European partners can make such a claim. There was a Question in the House the other day about the invigilation of prospective new member states into NATO to establish whether they could make a contribution. One wonders what contribution the countries which questioned such capability make themselves.
	The events of 11th September suggest that we not only have to revise the SDR policy in the United Kingdom but also see a more realistic contribution to security within Europe. Those who call for the second pillar in Europe cannot expect to be listened to with respect unless they also accept that Europe must make a greater contribution. They should not continue to rely on and then ignore the fact that it has long depended and still depends on the American umbrella.
	September 11th may require the Government to reappraise the situation but Britain should look at the matter in a more bipartisan way. There is today a flimsiness and sometimes an infantilism in the British media. In the past few days one would have thought that because the Taliban and Al'Qaeda did not enter into a shooting match with the Royal Marines somehow or other the situation has turned into a 21st century version of the retreat from Kabul. The fact that the Al'Qaeda and Taliban kept out of the way of the Royal Marines, and that the Royal Marines obtained and secured a very substantial amount of ordnance which the Taliban and Al'Qaeda could easily have removed if they had wished, had they not been opposed, seems to have been ignored.
	I am reminded of the fact that at one of the frostiest times of the Cold War, I visited a Royal Air Force operational station to find that flying hours had been cut dramatically. Indeed, the aircraft were being flown far less than the Auxiliary Air Force flew aircraft just before the Second World War. A journalist who worked for one of the more popular newspapers said, "The story is red hot". I said, "Yes, it is, but your newspaper won't publish it", and it did not.
	One should give credit to Her Majesty's Government. After all, the Jaguar aircraft have been upgraded; so have the Tornadoes; the C-17 has been acquired and has been used perhaps a great deal more than the Government anticipated not long ago. The helicopter provision has been generous. The Navy is getting aircraft carriers. Enormous steps have been taken to try to deal with the problem of poaching which, as many noble Lords have said, is a serious problem. We have to take it even more seriously. For example, I would say to the directors of any company which engages in poaching and ignores the reasonable deals that the services have offered that it will not receive any recognition or honour while their company behaves in that way.
	However, time passes and I want to follow an important point made by the noble Viscount, Lord Slim, about the red and green spear. Young men wanting to join the Army or Navy now wish to join the Paras, or the Special Air Service or the Marines. Those units attract attention. The enormous potential and the historic tradition of our line regiments—perhaps the noble and gallant Lord, Lord Inge, will allow me to refer to regiments such as the Green Howards which recruit in my home area—are now regarded as second best. That is a very dangerous position. The line regiments are often of high quality. They may have inadequacies in manpower as a result of poaching or whatever, but we have to ensure that their standing and tradition are maintained and that they are not regarded as merely a sort of reserve should the Paras and the Marines not deliver the goods.
	Recruitment is important. I believe that one way in which we could improve recruitment, apart from taking firm action to deter poaching, is to build up our cadet organisations. As I said in a debate in this House last week, I am involved in a modest way in the Air Training Corps Squadron. The youngsters whom we are sending into the services, not only the Royal Air Force, are of enormously high quality. They are already committed before they enter. They have relevant experience before they become part of the adult force. In my view we are not devoting very many resources to them. We spend vast sums of money on television advertising campaigns and yet we are then not likely to attract the same high quality young people.
	I could tell the House—time does not allow me to do so—of the numbers of youngsters from my area who have joined the Royal Air Force in the past 12 months. The air force is getting a very good deal. It may not be the same in every part of the country but the potential is there. It is not only the services which benefit; the community benefits from seeing good young people made excellent because of the commitment, experience and opportunities that are offered.
	We should see an enhanced effort by the United Kingdom to persuade our partners in the councils of Europe to make a more realistic contribution. They cannot expect Britain to bear burdens to which they should more equitably contribute. I hope that we shall maintain that position. I am grateful that the noble Lord, Lord King, has given us an opportunity to make these comments today.

Lord Selsdon: My Lords, few Members of your Lordships' House have fathers alive and, I believe, none has grandfathers or great-grandfathers. Therefore, we have to rely on our knowledge and experience and on what we may have been taught by others. But none of us should doubt the knowledge, competence and background of my noble friend Lord King. It is most appropriate that he introduced the Motion today.
	My own grandfather won the Sword of Honour at the Britannia Royal Naval College, served in the Mediterranean fleet, was invalided out with "Malta Dog" and then, in the First World War, wishing to help, became a private ambulance driver and a stretcher bearer. Towards the end of the Second World War, when I came back from Canada and the States, he would suddenly wake up and say, "We must go on an expedition today. It is a suitable day for an expedition". I would say, "Grandpa, what's an expedition?" He said, "It's going forth with martial intentions. It's a warlike enterprise".
	The purpose of expeditions and expeditionary forces is to go out in order to create peace. I found this difficult to understand when we were surrounded near Newbury in the country by German prisoners of war, Jewish immigrants and land girls. I have thought about this. Is what we are about today concerned with peace? I am one of the most lowly members, a vice patron, of the Atlantic Council which is made up of NATO members and members of other countries. Its purpose at present is to raise money to recruit teachers and others to advise on the value of peace to those who do not know the dangers of war. It involves lecturing in schools at a time when the Government have decided to cut our funding. It builds a very close relationship with the United States.
	I was moved by the speech of the noble Lord, Lord Black of Crossharbour. It made me think of the serious losses suffered by combined operations in the last war, for example, at Dieppe when 60 per cent of all the Canadian forces who crossed the Channel failed to come back. I recall too the Canadians who were lost recently to friendly fire in the mountains; and our own troops who were lost to friendly fire.
	This is the International Year of the Mountains. With the Swiss ambassador, I have the honour to be co-chairman of the Committee of the Year of the Mountains. I thought back to the dangers of mountain warfare and to Sun Tzu who, in the Art of War 500 BC, said,
	"Do not climb heights in order to fight".
	Even Napoleon advised one that in mountain warfare the assailant was always at a disadvantage.
	My experience relates to Cyprus, EOKA terrorism, and friends in Kenya. Overall we have enormous historic experience which has been passed down through generations in the Armed Forces. Whether one talks about the relief of Mafeking, Thomas Cook, with whom I worked at Midland Bank—he had to arrange for the British Expeditionary Force to go up the Nile in order to try to look after General Gordon—or the troubles in Afghanistan, it matters not. That knowledge and experience remains within our Armed Forces. Our problem with expeditionary forces is that when we send them they are meant to do something expeditiously and then withdraw. The difficulty today is that when we get to the area we find it difficult to go backwards.
	We have knowledge and experience which is not available to the United States. I have previously declared another family relationship. I have three nephews in the United States. My sister is there. One was in the SEALS, one was in the Rangers, and the job of the third was to get his boss, Senator Glenn, back into space. They are not the important eyes and ears of the noble Lord, Lord Black, but they are a little closer to the ground. Although they have left those forces, they say that what was best about working with the British was gaining historic knowledge.
	I turn to Afghanistan. I should explain that I chaired a previous government's Committee for Middle East Trade. I would never go to fight the Afghanis. They can copy any gun in the book. Indeed, we had a major disaster in Afghanistan. But perhaps I may tell noble Lords a simple story about the time when the British expeditionary forces were in that country. At night, the tepees would be set, the guns crossed in front of a fire, and the sentries stationed on guard to look after everyone. But the Afghanis learnt the lingo. They could surreptitiously encourage a sentry, in the English language, to leave the camp. They would then take the guns away and copy them.
	My Russian friends have explained that it is a dangerous area to be in; indeed, Napoleon was warned about the dangers associated with the mountains. We probably have the only forces in the world with mountaineering capability, but we must be able to get our expeditionary forces to such places. If the politics are not right, the ability to land such troops by air will be most difficult. I served in the navy. After that wonderful presentation by the Royal Navy the other day, the role of the British Army should—as Jacky Fisher said—be that of a projectile to be fired by the British navy.

Lord Inge: My Lords, I thank the noble Lord, Lord King of Bridgwater, for initiating this debate. We are not talking about the European defence and security policy initiative this afternoon. However, when we discuss the matter on Monday, I hope that noble Lords will take note of the important remarks made by the noble Lord, Lord Black of Crossharbour.
	The United Kingdom appears to take great pride in its Armed Forces. They certainly score well in public opinion polls. But that pride is not reflected in the funding that they need and deserve. I found it very disappointing that there was no mention of defence in the Chancellor's Budget Statement. I agree with my noble and gallant friend Lord Guthrie that the defence Ministers give the defence forces strong support. However, that support is certainly not reflected in the attitude of the Chancellor or the Treasury.
	The end of the Cold War greatly reduced the direct threat to this country. There is also a feeling that military operations in the future will be small-scale—like peace enforcement, peacekeeping, or crisis management—without people realising the complexity and danger of such operations. That has led to a complacency in government about the importance of properly funding our Armed Forces. In a way, our Armed Forces are paying the price for their own success on a wide range of operations. It would be very foolish to take that operational success for granted, because already very serious gaps are developing in our military capabilities. We might get a very nasty shock. We should never forget that, once allowed to run down, military capabilities take years to build back both in terms of people and in terms of equipment.
	As many other noble Lords have said, the two immediate problems facing our Armed Forces are very significant under-funding and serious over-stretch, which are leading to the loss of some very important skilled people. The fundamental problem is that our Armed Forces are too small for the many operational tasks placed upon them. Severe cuts have been made in the defence budget since the end of the Cold War on the assumption that the world would become a safer place, and certainly before the threats to our security became a little clearer, although I believe that it would be foolish to predict with any certainty how those threats will develop.
	I suggest that we should expect the unexpected and recognise that we need in place a wide range of military and other capabilities in order to give Her Majesty's Government the widest range of options for their use. I hope that the new chapter of the Strategic Defence Review will give thought to the spectrum of operational tasks that they might face. Each campaign is different—I have in mind, for example, the Falkland Islands, the Gulf War, Northern Ireland, the Balkans, Sierra Leone, Afghanistan, and the fight against international terrorism. Each campaign writes its own individual script. Indeed, what is around the corner in Iraq, in Somalia, in the Yemen, or in the Sudan?
	The Strategic Defence Review rightly emphasised the need to improve our ability to project military power. However, it is now very clear that that review was seriously under funded. That under funding has already led to major cuts being made in the equipment programme; and there are more to come. This major funding problem has been made much worse by the 3 per cent savings demanded year upon year.
	I recognise that some important programmes remain, like the replacement for the CVR series of vehicles, and the new aircraft carriers, but others have suffered. As we have seen in newspaper reports for at least six years, the Fleet will not have an effective defensive air capability. Many of the other programmes that have been cut seem small in themselves; but, taken as a whole, they add up to a very serious reduction in fighting capability, particularly for the Army. I find the public/private partnership for the Royal Air Force's air-to-air refuelling tankers a very doubtful arrangement for such an important operational capability.
	Put another way, we are accepting that we are prepared to order our servicemen and women to go on operations and risk their lives without the best possible equipment. On top of that, training has been cut back, serious risks are being taken over operational logistic support, and the quality of both single and married accommodation is awful in too many locations.
	I hope that the new chapter of the Strategic Defence Review will have the courage to address the gaps that there are in equipment, in training, and in operational logistic support. The noble Viscount, Lord Slim, rightly pointed out the dangers of a 1st and 2nd XI army. I should just tell the noble Lord, Lord Hardy of Wath, that I have never included my own regiment in the 2nd XI.
	As my noble and gallant friend Lord Guthrie said, Ministers will have recognised the quality and worth of our special forces, and would like more—something, frankly, we have been trying to achieve for most of my military service. But like the noble and gallant Lord, I believe that it would be a fundamental mistake to reduce the high standard of probably the best special forces in the world in order to increase their numbers. Also, special forces are best employed at the strategic level, which is where the best operational results can be achieved. I hope that the Ministry of Defence will not make the mistake of using them at the tactical level.
	There is much talk about new roles for the Territorial Army and the reserve forces. A key role remains the reinforcement of the regular Army, including the thousand or so men and women who they provide regularly—and very commendably—to bolster the regular Army. Following the events of 11th September, there could also be a very important role for them to play in what I would call "home/civil defence". I do not just mean a guarding role. I suggest that a very exciting role could be developed for them. "Exercise Brave Defender" in 1985 showed what the Territorial Army is capable of achieving.
	In conclusion, I believe that we have much to learn from the results of 11th September, and from the other threats to our security. I am well aware that they are wider than just military. We need to consider very seriously the improvements that our Armed Forces need to meet the wider range of threats posed by international terrorism. But it will undoubtedly mean more money, and probably larger Armed Forces.

Lord Lyell: My Lords, it is a pleasure to follow the noble and gallant Lord, Lord Inge. I should like to begin by saying how grateful I am to my noble friend Lord King for giving us the chance to hear such excellent speeches—above all, the notable maiden speech of my noble friend Lord Black. Like that organ of the press Private Eye, I thought that surely there was some mistake: first, I find myself so high up the batting list; and, secondly, there is so much time available to us. When I looked at the list of speakers yesterday, I understood that we would have just three minutes each for our speeches. I hope that that is the time that my remarks will take. If there is any spare time available, I trust that other noble and gallant Lords will be able make use of it.
	We have heard an enormous spread in virtually three dimensions around the world on the subject of defence. I should like to remind your Lordships, literally, of what the noble Lord, Lord Hardy of Wath, and the noble and gallant Lord, Lord Inge, mentioned about the 2nd XI. In February of this year, the House of Lords defence group went to visit the training centre of the Royal Logistics Corps at Blackdown. We enjoyed the most fascinating visit. We met the young men and women whom I call "the unsung heroes"; namely, those training for the fire force. Youngsters are taught to be in the first line of emergency—sorting out fires anywhere within a military base—before the professional firemen arrive. Although they might be amateurs at heart, they behave in a most professional way.
	We also visited the Pioneers. When I was a young soldier, I seem to remember, the Pioneer sergeant was the only man in my battalion who was allowed to grow a beard. He had crossed axes on his sleeve. What he used them for I was able to see at Blackdown. Anyone who has seen television reports of what our Armed Forces put up with, what they do and what they are able to achieve, both in military terms and for the civilian population in the Balkans, will appreciate what the noble Lord, Lord Hardy, and I were able to see that day. We also saw the various other aspects of the Royal Logistics Corps.
	The most interesting aspect of our visit was in the afternoon. We found that every single one of the young men and women in that corps at that depot are not there merely to get on with their training—they do their training all round the country. They come to Blackdown to become soldiers. That is the important first duty. We found young men and women doing all the things that I was trying to do 45 years ago as young platoon commander at Hythe, Warminster or at Pirbright Ranges, but they were superbly trained, keen and very articulate. As the Army advertisement on television expresses it: "Be the best". These were young men and women who were already good, and who were being turned into excellent members of the Armed Forces. Indeed, they were no 2nd XI or lower order batsman. We see what Mr Eriksson can do with his young men when team members go down with injuries. One finds that the supposed 2nd XI are the ones who save the bacon on a particular day, as we hope they will.
	Last year, I was suddenly alerted to a tea party in your Lordships' Dining Room, and the noble Baroness, Lady Darcy de Knayth, invited me to join those present. I found a group of 20 young men from 800 and 801 Squadron, Royal Naval Air Service, based at Yeovilton. What they told me was particularly relevant to the comments of the noble and gallant Lord, Lord Craig, about Sea Harriers. I shall not blow the trumpet of the House of Lords Defence Group, but if your Lordships care to look, you will find that there is a visit planned to the Royal Naval Air Station at Yeovilton, directly as a result of the keenness and vigour of those young men.
	They are very much concerned about Sea Harriers. As the noble and gallant Lord pointed out, there was a debate on these matters in another place a week ago. I hope that the Minister will be able to confirm the following to me in writing, because we are pushed for time in this debate. Am I right in thinking that there are about 17 active FA2 Sea Harriers? How many GR7s and GR9s will be replacing them over a period of time, or perhaps eventually, possibly in 2004, when the Sea Harrier may be phased out.
	I was interested to note the use of the splendid word "marinisation" in relation to the Joint Strike Force. I believe it was used by the Minister's colleague. I wondered whether this was something about which I should consult Mr Bibbiani in the Refreshment Department, but I believe it is something to do with making the Joint Strike Fighter adaptable to carrier-borne activities. Perhaps the Minister will be able to alert me to that at a later stage.
	Can the Minister reassure me on a further point? Is it in the Government's plans to withdraw the Sea Harriers from active duty from 2004. Is everything to happen all at once? Perhaps the Minister can inform me—indeed, I may have missed some information given by the Parliamentary Under-Secretary of State in another place last week—as to what might replace them? If the Minister can help me over this matter at a later stage, I shall be grateful. Meanwhile, I am grateful to my noble friend Lord King for introducing the debate and I look forward to the Minister's response.

Lord Lea of Crondall: My Lords, I contribute with some hesitation to a debate on the Armed Forces of which, apart from two years' National Service some 40 years ago, I have no direct experience. I exclude an interesting day out a couple of years ago when I was invited to join the saluting stand at an Army apprentices passing out parade at Arborfield, Berkshire, where apprentices receive training for the first 19 weeks before going on to the technical corps. I recall that 20 per cent of them were young women. The commanding officer said to me over lunch: "They get here with their rear end hanging out of their trousers, but when they leave they go to join their technical corps with great pride in the future". I was able to confirm that in conversation with them. That is one of the great pluses that the Armed Forces contribute to society.
	The first point I want to make from the perspective of a non-specialist may be self-evident. Everyone who takes an intelligent interest in the affairs of the country knows that there is a tremendous question of "stretch" in the Armed Forces at the present time. Members of this House need not think that the message has not got through. It got through loud and clear some time ago—as has another point which specialists may think that non-specialists have not taken on board when indeed they have. I refer to the tremendous consciousness of the level of professionalism in our Armed Forces and the pride that the whole country takes in them.
	However, a key question was left dangling in the air by the noble Lord, Lord King, in his interesting introductory remarks. In referring to overstretch, he said that there must be a limit. Must there? Is there? Can there be? What if there is not? The whole world cannot become a British protectorate. But somehow it must become a world protectorate, as my noble friend Lord Desai hinted. That is the challenging agenda we are inevitably asked to set ourselves these days.
	Can we run the whole world? The Prime Minister was paid some back-handed compliments vis-à-vis his speech to the Labour conference. But it reflected a great deal of our history, going back to the British Empire. A large number of people in this country tuned in to what the Prime Minister was saying about many parts of the world and about our responsibility. We have only to think about all the charities to which we give money and all the people—from the Churches through to the trade unions—who have connections around the world. It is not surprising, given our cultural history, that that should be the case.
	A further point has not been made so far but must enter into the debate. In the world system—and without a doubt in the United Nations system—there are now more and more global benchmarks for international and national behaviour. There are rules governing not merely economic questions of trade and investment but freedom of speech, good governance and so on.
	A number of years ago, I worked briefly in Sierra Leone. At that time, many of the locals would say in private that the only time they had good governance was when the British were there. Is the implication that we have to be there again now for a long time? These questions do not go away. They will become more prevalent in the world that we must all run together.
	Another contradiction in the debate relates to the problem of overstretch. I was rather provoked by the important maiden speech—I am being no more controversial than he was—of the noble Lord, Lord Black. He said that we have a great degree of commitment to the leadership of the United States. That is not in doubt. But in the context of a debate regarding the limit of stretch in our Armed Forces, would Iraq be an exception? We must have some consistency in our view as to the criteria for entering new areas.
	On the politics of that, perhaps I may say—without wishing to enter into a debate about Iraq—that I was in Turkey last week as part of a delegation to Ankara. It was obvious that our friends in Turkey see the situation in Israel/Palestine as a priority. That is the view even in a very pro-Western part of the Middle East. I do not think that the American characterisation, at least as described by the noble Lord, Lord Black, would be very fair, as seen by some of those countries.
	There is a certain schizophrenia about Europe in the American mindset. Obviously, we take a certain disdain from America about anything that goes on over here as quite normal. After all, it happened in 1944. We have to build up the European capability and not take a grudging attitude. I welcome the much more positive attitude that we all seem to be taking—the Minister will correct me if I am wrong—to the European rapid reaction force. That point is mentioned in a Select Committee report to be debated next week. The Laeken declaration provides for a 180,000 Helsinki target capability to be sustained. That is 60,000 troops with a two-month timescale at any time.
	We need to look at the GDP per head contributions of some countries. Our figure is 2.4, similar to that of France. Some countries are up with us, but the figure for the Netherlands is 1.9, for Italy 1.9, for Germany 1.6, for Denmark 1.5, for Belgium 1.4 and so on. That needs to be examined.
	Finally, the report that we have just completed on the Balkans shows that the EU countries together spend £1 billion a year on aid to that region and £5 billion a year on security there. If we want to talk down security expenditure in the Balkans, we have to talk up all the other involvement. Does my noble friend agree that that message often arises in such trade-offs with regard to stretch of the Armed Forces?

Lord Burnham: My Lords, it is not the convention of your Lordships' House for speakers other than the succeeding speaker to congratulate a maiden speaker, but I cannot resist doing so on the grounds that the first action of the noble Lord, Lord Black, on taking control of the Daily Telegraph, at nine o'clock on a Monday morning, was to sack me. I think he was probably right. I have been sacked regularly ever since. In that context, I thank the noble Lord, Lord Sandberg, for his remarks. The noble Lord, Lord Black, cannot say this as the proprietor, but the armed services owe a great deal to the Daily Telegraph and to its reporters and commentators, headed by Sir John Keegan, for their work in supporting the forces and looking into their problems.
	We have heard a wide range of views. I am sorry that we have not heard from the noble Lord, Lord Gilbert, on heavy lift or from my noble friend Lord Freeman on the Territorial Army to complete the picture. The most startling comments that I have heard this afternoon were the frightening views expressed by the noble and gallant Lord, Lord Guthrie. Those views are particularly startling and frightening in the light of all that we have heard coming out of the Ministry of Defence over the past three years.
	We know that the professionalism and devotion to duty of our Armed Forces is undoubted. The Marines and the Parachute Regiment have worked magnificently, but there is a limit to how much they can do. I stress that the Government are in real danger of asking them to do too much. I entirely support the noble Viscount, Lord Slim, the noble Lord, Lord Hardy, and one or two others in saying that there is a serious danger of inculcating a "them and us" mentality, which is bad for morale in those units that may consider themselves left out.
	The Ministry of Defence needs to look at its recruiting policy. Regiments that are successful in recruiting are not allowed to keep their recruits if the number exceeds a certain low establishment figure. The Coldstream Guards are suffering particularly from that. After more than 200 years, there still seems to be a failure to recognise that men do not join the Army—they join the Coldstream Guards, the Black Watch, the Border Regiment, REME or whatever. That is what they want to do. They do not want to be sent elsewhere.
	The other failure is to realise that if a man joins the Army, he wants to join it now. The concentration of almost all the initial infantry training at Catterick has meant that the facilities there are incapable of handling the numbers wanting to come in. In consequence, there is often a waiting period during which men go off and do something else. That could largely be resolved by designating one battalion for, say, three years as a training battalion. That might not be popular in some quarters, but it would undoubtedly improve the long-term manning problems of that battalion. It would be extraordinary if the sergeants did not hive off a percentage of the recruits for their own regiment, particularly if they were footballers.
	The recruiting problem is serious and retention is worse. Some simple actions could improve the recruiting problem. Efforts should also be made to get the right quality of recruit. There is a serious shortage of computer-literate, IT-trained, fit men coming in. Maybe it is the fault of the general education system, but the armed services are being forced to do work that should be unnecessary to bring men up to the basic standards that they require.
	I have talked largely about quality. Quantity is another matter. We cannot go on sorting out the affairs of the world without the co-operation of the Treasury. It has been said, probably rightly, that the two chief enemies that our forces have to face are the Treasury and the Foreign Office. A number of noble Lords have commented on the problems. I am afraid that it is inevitably necessary to quote Kipling:
	"For it's Tommy this, an' Tommy that, an' 'Chuck him out, the brute!'
	But it's 'Saviour of 'is country' when the guns begin to shoot". The Government do not seem to realise that the guns are shooting. Apart from all the normal suspects, Sierra Leone must be likely to blow up again at any moment. The UN troops there are better than they were, but many of them do not have the necessary expertise. For example, the Jordanian forces have little opportunity to practise jungle warfare at home. If Sierra Leone blows up when the results of the general election are seen, who is likely to be called in? The British, probably. The problems in the Middle East also show no sign of abating. We must suspect that if it is necessary to bring in the United Nations, NATO or the European rapid reaction force, the British will have to oblige. We do not have the men, let alone the materials.
	Closely allied to the question of men is that of materials. The Armed Forces must have the right toys to play with. They would prefer them to be home made, but the most important thing is that they should work. In the course of this debate, all the normal problems have been mentioned. It will be interesting to hear the Minister's reply. It is important that we know more about the Sea Harriers, the Type 45s, Bowman—although that is now largely a joke—heavy lift and the current situation with the Germans and the A400M, and Challenger 2. The list goes on.

Lord Chalfont: My Lords, I must first join other noble Lords in thanking the noble Lord, Lord King, for introducing this debate. There are few Members of this House better equipped to initiate such a debate than the noble Lord. He has done it with his customary incisiveness and forethought. He has also given us the opportunity to have a debate which has been to some extent very geo-strategic or geo-political. It has ranged widely over a number of international matters, none more geo-political than the remarkable and refreshing maiden speech of the noble Lord, Lord Black. I am afraid that I shall narrow the focus a little and simply ask the Minister some direct questions about our Armed Forces.
	The foundation of the Government's defence policy is the Strategic Defence Review of 1998, widely regarded—as the noble and gallant Lord, Lord Guthrie, said—as a positive and constructive contribution to thinking about the organisation and operational doctrine of our Armed Forces. It remained valid, with relatively minor adjustments, until the White Paper of 2001. Then came the notorious 11th September, and with it the need for another serious reassessment. The Government are undertaking this reassessment, and I understand that we can soon expect the results of that in a new chapter to the Strategic Defence Review, which will presumably set out the Government's view on whether we need to make further adjustments to our forces to meet the threats of terrorism and what are now known as asymmetric threats.
	I should say in passing that I have some reservations about the need for a public discussion about this subject. Defence is a highly complex, technical and specialised matter which demands not public discussion, but the advice of trained people with professional expertise, followed by decision-making at the highest political level. However, the discussion document does have the merit of indicating how the Government's thinking is developing, and it seems likely that the new chapter will focus on expeditionary forces and the war against terrorism as important elements of future defence policy. If this is so, there are—as the noble and gallant Lord, Lord Guthrie, said—some serious financial implications, especially in the field of equipment procurement.
	I should like to ask the Minister whether he can give the House some reassurance about this. Is the funding of the Royal Navy's aircraft carrier task force programme, which is at the heart of our expeditionary force concept, secure? It postulates some very high expenditure well into the future. I wonder whether, in the context of the current and foreseen defence budget, he can guarantee, or at least assure us, that that equipment programme is secure.
	In the Royal Air Force, what is the position about the tanker aircraft? Can the Minister say whether it is true, as is widely said, that the tanker fleet will depend on a public/private partnership—which seems a strange way of funding and controlling an essential element in the organisation of our Armed Forces? In-flight refuelling was a vital part of the air war in Afghanistan, and it is likely to be a vital part of any future expeditionary force. I should like an assurance that its funding is secure.
	In the Army, too, there is some anxiety about the future. Are the Government happy with the concept of the multiple-role armoured vehicle, the European concept of a tank, which does not seem to be designed for use in an expeditionary force role? Is not the MRAV as currently conceived too heavy to be air-transportable? If so, it does not seem to have much place in an expeditionary force role. Would it not be better to invest more heavily in the future rapid effects vehicle—the FRES—proposed by Vickers Defence Systems? Here perhaps I should declare an interest, although a long past one now, as a former chairman of Vickers, at the time when we built the four Trident submarines which the noble Lord, Lord Marlesford, defended so spiritedly today.
	To all this must be added a requirement which is essential in modern warfare—ISR: intelligence, surveillance and reconnaissance—as the noble Lord, Lord King, said in opening. As military doctrine moves away from the familiar concept of the armoured division towards that of the rapidly deployable brigade combat group, armies are going to need technologically advanced and very expensive broadband communication networks. They are very, very expensive. Are the Government ready to invest in them?
	A look at the 2002 defence budget does not inspire much confidence. The Budget does not pay a great deal of attention to defence, which, as the noble Lord, Lord Desai, said, is one of the most important of our public services. It is true that £155 million has been allocated to urgent operational requirements, but that is pocket money in the context of long-term defence spending. I shall, if I may, mention just one of the important statistics. The Treasury's estimate of government spending for 2002-03—total managed expenditure, as it is called—is estimated at £418 billion. Of this, £195 billion—46 per cent—is allocated to health and social services, whereas £24 billion—just over 5 per cent—is for defence.
	I ask the Minister whether, in the current and future international security climate, that seems to be a reasonable allocation of resources. If questions of health, education and social security have priority, they may soon become very largely academic unless we devote more resources and more money to defence. The Government's initial election manifesto promised a strategic review to,
	"consider how the roles, missions and capabilities of our armed forces should be adjusted to meet the new strategic realities".
	So far, the Government have fulfilled that undertaking, and they clearly intend to continue to do so with their new chapter. However, the price of implementing the new chapter will be a very high one. Are the Government prepared to pay it?

Lord Hodgson of Astley Abbotts: My Lords, I congratulate my noble friend Lord King on giving us a chance to discuss this important topic. I shall take up the important general point which he raised about overstretch and seek the Minister's reassurance on two specific points, the first of which is the failure of the Government's recruiting policy. The persistent undermanning of our Armed Forces is adding to the overstretch which is causing such difficulty for those serving in our Armed Forces.
	In March, I had the chance to visit Nepal, an unhappy country where, for some months—as more people in this country have recently begun to notice—there has been a state of near civil war. My visit included the town of Pokhara, where the British Army Gurkha recruiting base is located. I was able to visit the base itself and discuss matters with the British Army officers stationed there. They were extremely helpful, kind, courteous and answered all my undoubtedly amateurish questions, and they also told me some truly astonishing facts. The first was that, each October, as the annual recruiting season begins, the base receives the names of no fewer than 25,000 people who wish to serve in the British Army. Of those, 800 are selected to come to Pokhara for training. Of those, 200 to 250 are taken into the Army, and 550 to 600 sadly are sent away.
	There are, as I understand it, currently about 3,500 Gurkha soldiers in a British Army of about 100,000. Surely there must be a case for bridging at least some of our recruitment gap by increasing the number of Gurkhas in the Army. They make soldiers of competence and ability and have been proven over many years. It is not as if there is a reluctance on the part of the Government to recruit overseas. Recruiting is going on vigorously, apparently, in the West Indies and in the South Pacific, notably in Fiji. I tabled a Question for Written Answer, which the noble Lord, Lord Bach, kindly answered on 29th April, concerning the number of Fijians who have been recruited into the British Army in the past few years. There were 472 in 2000 and 364 in 2001.
	Cultural differences are much sharper for Fijians as they serve as individuals. Imagine leaving Fiji in the South Seas and becoming the only Fijian in a rifle company serving in Northern Ireland. No wonder there are anecdotal concerns about loneliness, discipline, etcetera, none of which need apply to the Gurkhas because they are unit based. But why—perhaps the Minister can tell me this—are we recruiting more Fijians now than Gurkhas?
	I turn to the vexed issue of Gurkha pensions. A case led by a certain eminent lady barrister now contends that Gurkha personnel should have the same pension as British Army personnel. At first sight that may seen only right and fair. But the reality appears rather different. A Gurkha rifleman serves for 15 or, at the most, 17 years, after which he receives a pension. As he begins his service at the age of 18, he is on pension by the time he is in his mid-thirties. The pension is about £80 per month—£1,000 per annum—which by UK standards does not seem a great deal. But these people live in Nepal not the United Kingdom. By comparison, the House might like to know that a school teacher in Nepal after a full career gets a pension of £40 per month—half that of an ex-Gurkha who in any case receives it some 25 years earlier.
	The impact of the money from the British Army received in Nepal by both serving and retired personnel is critical to that poor country, wedged as it is between India and China, both struggling for regional advantage. I refer also to the impact of entrepreneurial activity. Many taxi companies, restaurants, guesthouses and trekking companies are run by people who have served in the Army and have used their training to begin a business after they retire. Those people are, of course, a valuable source of technical expertise. There is a large Gurkha engineering squadron in the British Army and the skills learnt there provide expertise in road building, construction, water supply and electricity connection—all vitally needed in Nepal.
	My concern is that if the pension case is successfully prosecuted, there will no doubt be a dramatic increase in the costs of using Gurkhas in the British Army. The "money men" in the Treasury—the "termites", as my noble friend Lady Park called them—will then no doubt begin to question the value of recruiting Gurkhas. That could bring to an end a relationship which has been, and will continue to be, of enormous value to both sides at both a national and an individual level. What may have begun as a well meaning gesture may have a completely different conclusion—the law of unintended consequences working with a vengeance. I look forward to hearing the Minister giving us the up-to-date position on the pension issue, on the recruiting policy as it affects Gurkhas and Fijians and on the shortage of recruits in the Army generally.
	The second point I wish to deal with relates to the impact of overstretch on individual servicemen. I refer to the frequency with which emergency unaccompanied overseas tours are now having to be taken as referred to by my noble friend Lord King. It is not just a question of the frequency of tours but also of worries about the quality of recreational facilities and opportunities to communicate with home via the phone or the Internet during those tours. Those facilities appear modest and menial by comparison with those of other nations in the UN forces and are of concern.
	I too have heard the anecdotal evidence referred to by my noble friend Lord King about troops being rotated between units so that the 24-month gap commitment can be maintained. That must be a distinction without a difference. When I tried a year ago to discover exactly what the position was as regards individual servicemen, I received the astonishing reply from the predecessor of the noble Lord, Lord Bach, the noble Baroness, Lady Symons of Vernham Dean, that individual service records were not kept because the cost of so doing would be prohibitive. That is an astonishing admission and one that no company in the private sector would get away with. When I raised the matter with the noble Lord, Lord Bach, in a debate nine months later he said that,
	"recording separated service for all service personnel is now a key objective of the Armed Forces' personnel strategy".—[Official Report, 16/01/02; col. 1111.]
	I hope very much that when the noble Lord replies to the debate he will tell us that it is no longer a key objective as it has been done or will give us a timetable to indicate when we shall know exactly who has had to serve overseas and how frequently. Without that information we shall not be able to set to rest the rumours and we shall not be able to ensure that the specialist troops we badly need stay within the Armed Forces.

Lord Bramall: My Lords, so much that has needed to be said on defence has been said this afternoon and most excellently. Indeed, it has been said over and over again in the past few years. Where credit has been due, I like to think that praise has been generously given. But when there have been shown to be manifest weaknesses and shortcomings to be criticised, not much, if any, notice seems to have been taken particularly over the fundamental problem which has invariably been, and remains today, that of money, as so many noble Lords have said.
	In the past this Government have tended to play down, if not rule out, funding aspects as not being really relevant to the solution of this or that problem. But this fallacy has been exposed by the public arguments about the National Health Service in which Ministers from the Prime Minister downwards have made it clear that what you get out of a programme is largely—not wholly, of course, but largely—related to the financial resources you invest in it. That applies no less to defence than it does to the health service.
	The root of the matter of course, as we all have to recognise, is that unless something exceptional is done by a Secretary of State—and I have known it done—and, more importantly, by a Prime Minister, it is the Treasury rather than the Cabinet, let alone the department, that has the last word on defence spending. It calls the shots on the size and potential of our Armed Forces and it has a very good shot at trying to influence their shape as well.
	It has been doing that since the 1920s, with dire consequences in the interwar years. Apart from World War II and perhaps a single decade after it, approximately 1978 to 1987, when a Labour government committed this country to meeting the NATO target of 3 per cent growth in real terms in defence spending and which included the Falklands War when the Prime Minister was wise enough not to include a Treasury representative in her war Cabinet, it has been doing it ever since. In so doing it has reduced the country's insurance policy for its national security and support for its foreign policy from 5.7 per cent of the gross national product to barely over 2 per cent in a period of 15 years. And all this at a time when the world is probably more uncertainly fragmented, and potentially dangerous, than at any time in the past 20 years and when our forces, as we have heard, are stretched to the limit by all the tasks that this Government, not unreasonably, have in mind for them.
	Sadly, there is every indication that the Treasury is at it again and is determined to ensure that the very marginal increase in real terms promised by Ministers will never actually materialise because of the cash restraints which are even now forcing cuts in the only things that can easily be cut such as track mileage, fuel for aircraft, Territorial Army man training days, overseas and other exercises as well as early phasing out and delays in vital equipment capabilities in all three services, as my noble and gallant friends have said, all of which have a profound long-term effect on professional competence and capability and vital command experience.
	Somehow the Ministry of Defence, with the essential backing of the Prime Minister, must take arms against this or find funding from somewhere else because if we want our Armed Forces to continue to be the most professional and respected in the world, capable of performing at the drop of a hat most complex and dangerous tasks, often with as high a political as strategic content, to which this Government in particular have shown themselves determined to commit them, gratitude as well as the national interest should demand that they be given the modern weapons, communications and fully manned organisations to do the job properly. They should be consistently trained at every level and have the leadership and motivation to face hardship and dangers and, if necessary, lay their lives on the line. All of that requires adequate funding, not constant cheese-paring and salami-slicing and being forced time and again into highly damaging programme decisions merely to keep within some severe budgetary restraint imposed by the Treasury.
	I do not know what will come out of the new review. There is not time to go into that. What is needed now is not yet another unsettling reorganisation, which gives the impression of progress but which in fact saves yet more money, but adequate funding fully to implement the truly excellent Strategic Defence Review.
	Finally, I turn to a different subject altogether, which was touched on by the noble Lord, Lord Hodgson of Astley Abbotts. I hope that the Government will now do all that they possibly can to help the Nepalese Government in this critical fight against terrorism. Never has this country had a stauncher friend than the Kingdom of Nepal, which gallantly, unselfishly and dramatically came to our aid in two world wars, and which still, as we have heard, provides a steady stream of volunteers for our indispensable Brigade of Gurkhas. That country is in serious trouble from blatant terrorism. We must help it to overcome that because so much is at stake.
	In any successful counter-terrorist campaign in a poor country, one needs three things: economic aid to build up infrastructure and to improve the lot of those whom the terrorists threaten and try to impress; local protection for loyal citizens and their villages, and the denial of food to terrorists; and offensive military operations and ambushes against terrorists, which are based on steadily improving intelligence so as progressively to clear areas and eliminate the terrorist threat.
	In all of those respects, we should be able to help. We have so much experience of this sort of situation, particularly in South-East Asia. We could build on the effective welfare and aid programmes that are already in that country to help the quality of life of those in vulnerable areas. The British-trained ex-Gurkhas might form a nucleus of a home guard to protect their local villages and to release the Royal Nepalese Army for offensive operations. We should be able to provide advice and advisers to help the Royal Nepalese Army in the intelligence and operational fields; we could even supply some specialist forces.
	Naturally, we do not want to force ourselves on a proudly non-aligned country. However, I hope that any request to us from the Nepalese themselves will be considered most urgently and that no reasonable request will be rejected. They are our true friends. We must not let them down. If we can go to other parts of the world to help other people at such times, we can certainly help them. I hope that we will have some information on that point.

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, welcome the opportunity for this three-and-a-half-hour debate; it is nothing less than our Armed Forces personnel deserve. I am grateful to the noble Lord, Lord King of Bridgwater, for initiating this debate, particularly in view of his background and well-respected knowledge of the Armed Forces.
	It would be wrong of me not to refer to the maiden speech of the noble Lord, Lord Black. Like the noble Lord, Lord Burnham, I, too, had a professional relationship with the noble Lord, Lord Black; the difference was that he did not have the power to sack me, although he did have that power over the noble Lord, Lord Burnham. I used to negotiate with him and noble Lords will understand that I had to ensure that I was very well briefed. He would approach his negotiations with military precision. It was good to hear his maiden speech.
	I have to declare an interest. I chair the Armed Forces Pay Review Body. I am joined on that body by two respected Members of this House: the noble Lord, Lord Patel—Naren Patel—and my noble friend Lord Gladwin. Our remit is to recommend to the government of the day pay awards and allowances and to give recommendations on matters such as accommodation and charges. In the process of doing so each year, we meet about 3,000 Armed Forces personnel from all three services. We see them in groups of 10 or 12 at a time when their officers are not present. Those meetings take us each year to Northern Ireland and also to the Balkans, the Falklands and, this year, to Kabul. We will meet personnel in Oman, Karachi and Kabul.
	My contribution is based not on a background of Library or MoD briefing but on my personal experience of meeting, with my colleagues, personnel and their wives and families. I say "wives" not "spouses" because predominantly, still, today our Armed Forces are male, although increasing numbers of women are in the Armed Forces doing a first-class job.
	The review body is unpaid and independent. I was first appointed in the early 1990s by the then Prime Minister, John Major. After a break, I was appointed chairman by the present Prime Minister. I have been in the lovely position of criticising governments of both sides. The issue before us today is not new. I have had the privilege of being in this House for nine years and I have listened to many debates on the Armed Forces. All of them took a similar line to that adopted today—pointing out that there are not enough resources, that there is over-stretch and that this or that is wrong. We should pick out the real issues in the Armed Forces, which come from the personnel concerned.
	In the early 1990s, the government of the day staged a pay increase, which was very demoralising for the services and affected their pension. We criticised that. We also criticised the present Government when they continued that policy during their first two years in office. Those issues have a long history in the services and they affect recruitment and, more particularly, retention.
	We can make things uncomfortable for the Government. For example, we severely criticised the previous government for what appeared to be the hasty sell-off of the defence housing stock, and we criticised this Government for not putting sufficient investment sufficiently quickly into regenerating the stock that they still have with the Defence Housing Agency. I am delighted to say that £1 billion is now committed, although I should like that to be done more quickly. That is in this year's report.
	The noble Lord, Lord King, rightly referred to the problem of over-stretch. In many respects, that is exacerbated by the fact that the same groups of people are continually deployed. That is because of the nature of the work. The Strategic Defence Review provided for post-operational tour leave. That has worked and made a real difference. However, the surveys that we require to be conducted annually make it clear that service personnel are still not getting their total annual leave. They have that as an entitlement but not as a right. That does not help with retention.
	Noble Lords have criticised recruitment. I say, with respect, that every single public sector in the United Kingdom currently has severe problems recruiting personnel, whether that involves teachers, doctors, dentists or nurses. The real problem for the Armed Forces is retention. We spend substantial sums of money training. I gather that we spend about £3 million on a fast-jet pilot. We need to keep personnel when we have trained them. Pay is a factor in that regard, although they tell us that it is not "the" factor. We have conducted surveys, through multi-service working, across a range of nations' armed forces. In overall terms, our personnel are at the top of the bandings in view of their remuneration packages. There are one or two exceptional areas of allowances but, by and large, their remuneration package matches any. The real issue is their rounded quality of life. There is no doubt that over-stretch impacts on that, and continues to do so.
	The problem does not only affect personnel; their wives say, "I have had enough. It is good for you to go to the Balkans to do your work but when am I going to see you?". The personnel worry about their families back at home. The families' welfare package has made an enormous difference. They expect that because the Armed Forces are part of our society. Societies change and expectations change and in many respects the Armed Forces have not changed as quickly as they should have done. In terms of GDP, last year we spent 2.4 per cent and the Americans spent 2.9 per cent. In 1995 we spent 2.7 per cent, just half a per cent more. That comes from a NATO press release of December last year.
	This is an important issue. In recent times, no government have got it right, but we must continue to strive to get it right. My personal view—not the view of the Armed Forces Pay Review Body—is that the elastic has been stretched so tightly that some give has to take place. I wish the Secretary of State well in the talks on the Comprehensive Spending Review. The MoD needs some easing of the situation and some extra resources. I rather suspect that whatever is given will still not be enough for some Members of this House. I wish the Government well and it will be interesting to hear how the Minister responds to this debate.

Lord Vincent of Coleshill: My Lords, I beg the indulgence of the House for this unscheduled contribution on my part which has occurred due to a long-standing and unavoidable commitment that until this afternoon I thought would be prevent me attending the debate. I shall speak briefly.
	I speak against the background of your Lordships' consideration of the conclusions of the Strategic Defence Review on 8th December 1998. I expressed the view that the review had arrived at a strategically sound outcome—that is still my view—but with the proviso that it received adequate resources both for its effective implementation and to sustain its subsequent effectiveness.
	I have no time to return to the various concerns expressed during the debate about overstretch and underfunding, but I share many of them. I want to mention one particular aspect that does not always have high visibility in terms of defence priorities, but which could have a serious effect on our future defence capabilities. It concerns our investment in long-term defence-related research and development, which lays the essential foundations for our future generations of weapons and equipment and how we should employ them operationally to best effect. Shortfalls in that important area do not immediately become apparent because the gestation period to produce new and more effective systems or even totally new ones—like radar in the late 1930s—can be as long as 10 years or more.
	Today the United States is spending nearly 10 times more than we are on defence-related long-term research and development and, more remarkably, over three times more than the 17 European members of NATO combined. Coming from a single unified budget, the United States is usually able to spend that investment on defence research and development much more efficiently than we in Europe can in many different and separated areas. Surely, that reinforces the important point—certainly in that aspect of defence—made by the noble Lord, Lord Hardy, about lack of European burden sharing.
	The long-term effect of those trends if we do not reverse them will be that sooner or later our Armed Forces will lack the essential tools to do the job required of them. In an era when we rightly lay increasing emphasis on operational effectiveness and minimising casualties, the eventual outcome could be serious indeed unless we take action to put it right. For those reasons I hope that the Minister will take a serious and an objective look at the adequacy of the resources needed to meet the requirements of the Strategic Defence Review now and in the years ahead.

Lord Redesdale: My Lords, I welcome the debate initiated by the noble Lord, Lord King, and the noble Lord, Lord Burnham, and I welcome the excellent maiden speech of the noble Lord, Lord Black. I am sure that his contribution will help to focus media attention on this debate. Lamentably sometimes these debates do not achieve as much media attention as noble Lords wish.
	I want to congratulate the Government. The issue of Sierra Leone has been raised by a number of noble Lords, including the noble Lords, Lord Lea and Lord Burnham, but I take a contrary view to that of the noble Lord, Lord Burnham. I believe that Sierra Leone has shown what can be achieved with the judicious use of armed forces at the right time.
	I was pleased to read about Sierra Leone. But, unfortunately, it was a story about violence. Due to the forthcoming elections, stone-throwing was taking place between the RUF and the government supporters. What is remarkable is that people are only throwing stones, considering the turbulent and bloody history of Sierra Leone. I was asked to take part in the monitoring process of the previous elections, although, fortunately, at the last minute I was not required. The stories I heard from people who did go there were quite terrifying. The RUF, a body that probably no one can support, is on the point of facing electoral meltdown and defeat rather than military defeat. That must be a real indicator of how well peace-keeping and peace-making can be used.
	A major issue that has been discussed this evening is overstretch. It has been pointed out that overstretch refers not only to resources. I was interested to see in the statistical analysis of public expenditure that in 1984-85, £31.9 billion was spent on the Armed Forces, whereas in 2001-02 it is estimated that £23.6 billion will be spent. That shows that there has been a peace dividend to the country in defence expenditure. I concur with many noble Lords that that is perhaps pushing the limits and that efficiency is being taken to extremes in certain areas. However, the increase in resources will be a political decision, and while I could ask the Minister to pass on to his Treasury colleagues our request that more is spent, I am sure that he is already doing that.
	The other issue about overstretch is the ability of finding the troops to meet the commitment. The noble Lord, Lord Vincent, who had a role in the SDR and who was able to speak in the gap, said that he was satisfied that the SDR met the requirement that the commitment should meet resources. I believe that the SDR carried out a good job on that basis. However, two issues have been raised in the debate that put the commitment to resources equation in doubt.
	The first is Afghanistan. We have two forces in Afghanistan: ISAF and troops from 45 Commando. I have a couple of questions about ISAF. We on these Benches support the role of ISAF. It has achieved its goals of promoting peace and of giving the interim government a period in which to build up its own ability. First, has a definite date been set for the Turkish contingent to take over the command of ISAF? Secondly, when the Turks relinquish command of ISAF, is it correct that the British are pencilled in to take up command of ISAF if no other force has been found for that position? I do not believe that we on these Benches would be against that if no other force can be found. I believe that we have a long-term commitment to Afghanistan.
	The second element of interest in Afghanistan is the work being carried out in the mountains. It is a great success that so much ammunition has been denied to Al'Qaeda fighters. The very fact that they have had to leave Afghanistan and go into Pakistan must have degraded their ability.
	Another issue that was raised, and which will put a great deal of strain on our forces if we undertake military action, is that of Iraq. The major question we on these Benches would like answered is whether at present any military action against Iraq would be legal without a UN mandate. It is important not to forget that, though the regime is particularly unpalatable—I am sure nobody in this Chamber has any great love of the regime—any military action would have to take place under a UN mandate. We need a consensus on the matter.
	The week before last I was in the Gulf and the questions being asked related to what happens after military action is undertaken. These questions need to be answered. Who will take over if there is a regime change? Will there be destabilisation of the region immediately inside and outside Iraq? What consequences would an aerial campaign have on the whole of the Middle East?
	The first step must be UN inspectors going into Iraq. We all find it unacceptable that weapons of mass destruction could be in the hands of Saddam Hussein. The most effective way of making sure that those weapons are denied has to be weapons inspections.
	A number of other issues were raised this evening, one of which was the Territorial Army. I served as a menial lieutenant in the Territorial Army in the REME. But one of the problems I faced, particularly as a REME officer, was that it was a specialist corps. It needed trained individuals who held the required certificates to undertake their duties. And one of the most unfortunate factors was turnover. A recent figure gave 30 per cent turnover for the Territorial Army, which is a massive turnover for any organisation and is especially damaging if we are relying on certain key individuals staying on for a number of years and acquiring skilled capabilities.
	I particularly remember that one of the strange aspects of the way the Army was funded was that we received a consignment of new DAF trucks. However, even though we were a REME corps, we were not allowed to fix our own trucks. They were on a lease-back deal and would have to go back to the manufacturer for repair.
	Another area brought out this evening, notably by the noble Lord, Lord Hardy, is the Army Cadet Force. I echo the view that this is an extremely cost-effective way of introducing young people to the Armed Forces. It is a fact of life that young people do not now look at the Armed Forces in the way they did 20, 30 or 40 years ago. The noble Lord raised the issue of poaching. I have personal experience that it does not just happen in the Regular Army. My nephew was deciding whether to join the Scouts or the ACF. The ACF was publicising around the Scout units the fact that it provides paint-balling in a deliberate effort to poach young people away from the Scouts.
	I conclude on the case of the Gurkhas. The noble Lord, Lord Hodgson, raised this point and his comments were extremely valid. The basis under which the Gurkhas were paid was based on a historical situation that has now fundamentally changed. We now have a moral obligation to reconsider their position; to reconsider their pay structure and their pension rights. The Gurkhas are an extremely effective part of the British Army and we should look at pay scales that reflect that.

Lord Vivian: My Lords, this has been a stimulating debate. I am most grateful to my noble friend Lord King for moving this debate today. I agree and support the many remarks he made. Also I congratulate my noble friend Lord Black on his excellent contribution and hope that he will continue to speak on defence issues in your Lordships' House.
	It is impossible not to have noted that this debate has focused on a critical issue; that is, the chronic under-funding of the recommendations of the Strategic Defence Review. Throughout this debate, time and again, your Lordships have drawn our attention to this serious under-funding and lack of resources. I ask the Minister to take note of that. Your Lordships stressed various issues which will mean that, if funding is not forthcoming, the capabilities of our Armed Forces will be so reduced that they will not be able to undertake their current strategic roles and tasks and the defence policy of the United Kingdom may well have to be changed.
	In part some of the under-funding arises from the 3 per cent efficiency savings, which have become 3 per cent cuts in practical terms, and the £500 million savings being made are taking a heavy toll on the real capabilities of all three services. The impact of under-funding has resulted in shortages of personnel in all three services, amounting to a total of 9,397.
	At the start of the year the Royal Navy was short of some 2,189, the Royal Air Force 1,149 and the Army 7,477. Warships put to sea without the ship's full complement, causing double workloads in some skills. On 4th March this year the frigate HMS "Sheffield" was decommissioned. The West Indies Guard Ship is no longer on all-year-round patrol, and the Armilla patrol in the Gulf has been reduced to just one ship.
	On 28th February this year the Government announced the future disbandment of the Sea Harrier force, and I shall return to that subject. The SDR planned for up to three Astute class submarines, but only two have been ordered. In June 2001 the Fleet Risk Register stated that the Royal Navy cannot play its role in NATO's joint rapid reaction force because the ships were not always fully fit for task. Perhaps the Minister will be kind enough to confirm whether that is still the case and whether HMS "Invincible" is to be mothballed, leaving us with only two aircraft carriers.
	On 1st February the Government announced that a further air defence squadron of 12 Tornadoes was to be cut, saving a mere £2 million. In April last year the Royal Navy and the Royal Air Force were short of nearly 200 pilots. Again under-funding has created a crisis in pilot retention due to a lack of flying hours, too many months on operations and pay lagging behind the private sector.
	Under-funding has contributed to over-commitment, reduced individual training, caused cancellation and reduction of field training exercises, brought about a shortage of spare parts and retained the very poor standard of living accommodation which have all resulted in reduced retention.
	Savings found in the Defence Logistics Organisation from reducing stocks to the extent of some £2.8 million has been at the expense of training front-line capability and reserves. The effects of that are clear. The National Audit Office found that the Royal Air Force came close to running out of bombs during the Kosovo conflict. The 2001 Fleet Risk Register states that significant Army shortfalls have meant that ships are going to sea without enough ammunition to defend themselves and they are at greater risk of being hit by air-to-sea missiles.
	Some years ago MoD figures revealed that only 34 out of 90 Harrier jets, 28 out of 76 Jaguars and 59 out of 112 Tornado F3 air defence aircraft were fully serviceable. Recent MoD figures show serviceability for helicopters at around 50 per cent. SDR assumes operational availability at 80 per cent. The average rate of serviceability of helicopters for training and exercises is only about 11 per cent. Those are not savings, but cuts due to under-funding.
	The training details are equally depressing. In the past 24 months, 84 exercises have been cancelled. Reduced training lowers the efficiency and high training standards in regiments' primary roles for war fighting.
	Unless more funds are made available, the equipment programme will be affected even more than at present. There has been press speculation that the cost of the planned equipment programme will be reduced by £1.2 billion during 2001-05. Inevitably, that will have a highly damaging impact on the planned programme. Perhaps the Minister will inform the House whether there is any truth in that speculation—and, if there is, say which equipment programmes will be delayed or cancelled.
	I now turn to the issues concerning the Sea Harrier. I noted the comments made by the noble and gallant Lord, Lord Craig. We on these Benches are wholly opposed to the decision to withdraw the Sea Harrier from service—a move due to be completed in 2006. The aircraft is the only one fully operational with the advanced medium air-to-air missile, equipped with a highly advanced Blue Vixen radar and able to see some considerable distance over the horizon. The Sea Harrier is the UK's most capable interceptor fighter—the GR7 and GR9 are ground attack aircraft. The GR9 will not be fitted with the Storm Shadow stand-off missile. Even in upgraded form, it will be slower and less versatile and consequently will not operate safely without Sea Harrier cover.
	Without the Sea Harrier, the remaining obsolescent layered air defence will be limited by the radar horizon from ships and Sea King helicopters—a defence that will not prevail against sea-skimming anti-ship missiles such as Exocet. The Type 45 destroyer and its new principle air missile system could easily be saturated by a multiple threat from many directions. The engine and avionics upgrade of the Sea Harrier are not essential to its continued effectiveness in war. It will still deter and provide early warning of attack. The Sea Harrier was upgraded to FA2 standard only in 1996. Whatever the Government say, there is no justification for its withdrawal until the Joint Strike Fighter comes into service. It is the UK's most capable fighter and plays a vital role in defending the fleet from attack. Without it the fleet is put at unquestionable risk.
	Finally, I shall mention briefly two other major issues. The first is the pensions review. The MoD decision to make any new scheme neutral in cost is a grave mistake. The proposal to improve ill-health and dependants' benefits by reducing the pensions of other service personnel is unacceptable. The Armed Forces deserve a pension scheme that recognises the unique commitment that they make to the country.
	Secondly, I trust that the Government will make time for a full debate on the New Chapter. I am convinced that there is a greater role for the Territorial Army, providing that it is returned to formed units, but not at the expense of reducing the regular Army.
	As is customary, I pay tribute to the Armed Forces for their bravery, courage, determination and loyalty. I congratulate 45 Commando on its successful operations in Afghanistan and the British troops in the International Security Assistance Force, Northern Ireland, the Gulf, Bosnia and Kosovo for the excellent way in which they are carrying out their duties. The country owes them appropriate support and it is Parliament's duty to ensure that the Armed Forces have the necessary funding for them to have the essential capabilities to undertake successfully the tasks that have been assigned to them. Despite our support for the Strategic Defence Review, our frequent warnings over several years of the consequences of underfunding have not been heeded by the Government but disregarded.
	In the 11 years during which I have been in your Lordships' House, I do not think that five noble and gallant Lords, all of whom have been Chiefs of the Defence Staff in their time, and a previous Secretary of State for Defence have spoken in the same defence debate. I draw that to the attention of the Minister and all sides of the House as it shows the depth of concern about under-funding of our services. I agree with all that they said.
	Although the Ministry of Defence is attempting to ensure that the Armed Forces are given appropriate support, if under-funding continues, the Armed Forces will not have the capability to carry out their roles. There will come a time when we commit our forces to a war that may result in defeat and death to our servicemen and women. If that should ever happen while this Government are in office, the blame and the shame will lie entirely at the feet of the Prime Minister and the Chancellor of the Exchequer who, despite warnings from many quarters, including the Ministry of Defence itself, have continuously under-funded the Armed Forces. The time has come to cease under-funding.

Lord Bach: My Lords, I start by joining in the thanks given to the noble Lord, Lord King of Bridgwater, for opening this debate in such a reasoned and sensible way. I hope that he will forgive me if I also mention the noble Lord, Lord Burnham, whose idea this debate may be; I am also grateful to him.
	The noble Lord, Lord Black of Crossharbour, made an excellent maiden speech full of important insights into the relationship of the United States with the outside world, which, frankly, is one of the crucial questions of this year and the years to come. The noble Lord knows that all of us in this House look forward to opening our copy of the daily newspaper with which he has some involvement. He may also understand that sometimes, defence Ministers are not as keen as others to do so. But that newspaper does a great service in that it certainly keeps the Ministry of Defence awake to the problems that it is likely to face. In any event, I very much welcome his speech. I am delighted that he made it on this subject and I look forward to hearing his contributions on many future occasions.
	I welcome this debate because it allows me to pay tribute to the vital work that Her Majesty's Armed Forces are doing across the world. I know that the House will join me in congratulating them on and thanking them for their outstanding professionalism and self-sacrifice, which they show whenever they are called on. Almost every noble Lord has made precisely that point.
	I shall start with a few words about Afghanistan because, unsurprisingly, the media have paid much attention to that issue during the past few days. All noble Lords know how fully involved our Armed Forces have been since the campaign began. From the start of operations last October, we have maintained a powerful naval force in the Indian Ocean. Almost from day one, the RAF has been flying vital transport, reconnaissance, air-to-air refuelling and airborne early warning and control missions. As the noble Lord, Lord Black, said, that contribution has been warmly welcomed by the United States.
	We also have troops—mostly the Royal Marines of 45 Commando—engaged in anti-terrorist operations in that country. That force, about 1,700 strong with its own artillery and support helicopters, has undertaken combat operations in the high mountains and valleys of south-east Afghanistan under arduous conditions. The exercise has attracted considerable media attention. I am saddened that some who should know better have ridiculously questioned the need for British troops on the ground in Afghanistan or have claimed that we are achieving little because we have not killed enough terrorists.
	Frankly, I am astonished by the suggestion that crude and simplistic statistics such as body count should be the measure of success. Surely, the only valid criterion should be whether our actions contribute to our strategic objectives. I can assure the House that the efforts of our troops have not been in vain in that regard. First, they have denied territory to the Taliban and Al'Qaeda from which to plan, train and launch terrorist attacks. That is no mean achievement.
	Secondly, they have destroyed huge quantities of ammunition and collected a vast amount of valuable intelligence. The Chief of the Defence Staff made it clear that he believed that the operations had been a success. By destroying the supporting infrastructure, we help to deny terrorists the use of Afghanistan as a safe haven. That permits humanitarian agencies to operate freely in the region and, importantly, enables forces loyal to the Afghan Interim Authority to extend control to all parts of the country.
	Separate to that, but representing another strand to our overall strategy, is our contribution to the International Security Assistance Force at Kabul. Nineteen countries have contributed troops to the force which today is some 4,700 strong. The United Kingdom accepted the role of lead nation because that was the right thing for us to do. It is no coincidence that the United Kingdom was selected as the first country to lead ISAF. There is international recognition that our forces have the knowledge, experience and capability to sustain such a multi-national deployment. We should be proud of the positive contribution we have made.
	We must look to the future. We have reduced our ISAF commitment from a peak in-country of 1,800, with another 300 supporting, to its current level of around 1,500. The UN authorisation was originally for ISAF to deploy until June. It now seems certain that that will be extended, and we welcome the decision by the Turkish Government to take over as lead nation, with the United Kingdom remaining as a troop contributor, albeit at a reduced level.
	In the context of Afghanistan, it is right that I should mention some breaking news that was, I believe, broadcast on the six o'clock news a few minutes ago. This is the earliest possible opportunity to inform the House. Thirteen military medical personnel, serving with 34 Field Hospital at Bagram in Afghanistan, have been taken ill with an unidentified feverish illness. Two are very seriously ill: one has been returned to the UK for treatment, the other is at a US hospital in Germany. The others are being cared for by the remaining medical staff at Bagram.
	The exact nature of the illness is not yet known. Medical tests continue in an effort to isolate the cause. However, the illness appears to be contagious, and, as a precaution, 34 Field Hospital has been closed to all but similar cases. It will, of course, be re-opened for normal medical cover as soon as possible. In the interim, the German hospital based in Kabul will provide hospital cover for UK troops in Afghanistan. Next of kin are being informed. I thought it right that the House should know about that. We are discussing our Armed Forces, and I know that noble Lords would want to be informed. I am sorry that I cannot say more. No doubt, more information will emerge in due course.
	No one can predict the future with complete confidence, but I emphasise the Government's resolve to see the campaign through to the end. The tempo of operations will inevitably vary, as may the scale and nature of our deployments, but we remain absolutely committed to defeating international terrorism, as does the House.
	The noble and gallant Lord, Lord Bramall, referred to Nepal with some passion. He will know that our Prime Minister and the Nepalese Prime Minister met this week. I have no knowledge of what was discussed or of the matters that passed between them, but there is contact at the highest level between the two countries. The noble and gallant Lord's remarks will certainly be passed on.
	Personnel issues have, in some ways, been at the heart of the debate. As noble Lords said, we cannot afford to take the excellence of our Armed Forces for granted. Our servicemen and servicewomen are a priceless asset, and their well-being and interests must always remain central to our policy. We fully recognise and accept our responsibility to support and sustain our servicemen and servicewomen.
	A key outcome of the Strategic Defence Review, praised by several noble Lords, was a widespread recognition of the need for a coherent strategy, known as the Armed Forces overarching personnel strategy. I shall briefly set out the underlying themes of the strategy, and I hope that, in doing so, I address many of the points raised in the debate. If I do not answer all the questions asked—those of the noble Lord, Lord Hodgson of Astley Abbotts, for example, to which I do not have the answer—I will, of course, write to noble Lords.
	The first theme is the simple but essential requirement to create a culture of understanding, awareness and interest within the Armed Forces in order to draw good recruits, in the required numbers, into the forces. It is vital, as stated in the debate, to engage with our young people. We already have presentation teams that tour the country and visit schools to explain to youngsters the vast range of activities in which the Armed Forces are involved, both here and abroad. This September we will launch a new schools initiative designed to work closely with a select number of schools to get the message across even more effectively.
	The Armed Forces are seldom far from the thoughts of all of us. We are well aware of the key role they played in dealing with the outbreak of foot and mouth disease and in responding to local civil emergencies such as flooding and rescues by helicopter. We must bring such positive activities to the attention of the wider public.
	Secondly, we must make clear to those wishing to join what the Armed Forces require. We are looking for young men and women who appreciate a challenge, who possess the determination to carry out demanding tasks and who can use their initiative under pressure. We accept that there is a shortfall of about 9,500 personnel against the in-year requirement for the Armed Forces. As has been pointed out, unemployment is at its lowest level for many years, and more and more young people attend higher education. The Armed Forces must therefore compete in a tough market for scarce human resources. Inevitably, the best and the brightest are most in demand.
	I do not have time to describe all the initiatives that we have adopted. I am pleased to say that the recruiting figures for this year are expected to at least match, if not exceed, those of last year. We are making particular progress in the Army. In 1999-2000, we had an inflow into trained strength for the first time in 15 years, and performance during the past 12 months has also been strong. We are particularly encouraged by our success in attracting more women and more recruits from the Asian, black and other communities into the Armed Forces. I pay tribute to Colonel Wayne Harber, who has just stepped down as head of the Army's ethnic minority recruiting programme after six years in the job.
	I spoke about competition in the labour market. We must ensure that we recruit the best people from every sphere of British life and make our Armed Forces broadly representative of the population they serve. I am delighted to say that there has been a steady year-on-year increase in the number of recruits from ethnic minorities since recruiting goals were instituted three years ago. As of April 2001, the annual overall percentage of ethnic recruits has more than doubled. Final figures for 2001-02 are not yet available, but indications are that the Army, for example, has exceeded last year's outcome by recruiting over 5 per cent from ethnic minorities.
	That achievement was favourably reflected in Business in the Community's 2001 report, which praised the Army as,
	"one of a minority of organisations able to claim definitely that its programme on race equality has made a measurable impact across the organisation on a number of fronts".
	That is a worthy tribute. The Army deserves great credit for an important achievement.
	The third pillar is retention. That has been the subject of much discussion today. We accept that there is no quick or simple fix. We must understand what motivates individuals to leave the Armed Forces. We hope that our approach embraces a balanced and layered mix of measures, some addressing the broad issues such as pay, pensions, training, families, accommodation and diversity and others addressing issues of concern to particular high value groups such as aircrew, engineers and medical personnel.
	The success is matched by what we are doing across the board in retention strategies, including improved pay arrangements, better housing and working accommodation, improved training and better education opportunities as part of the Government's wider education strategy. I remind the House that the Government have accepted in full the recommendations of the Armed Forces pay review body.
	The noble Lord, Lord Mackie of Benshie, and the noble and gallant Lord, Lord Craig of Radley, raised the issues of aircrew retention and training. We accept that aircrew retention is a serious problem caused by the strong competition, even now, from civil airlines. We have taken a number of steps to address the situation, including the financial retention incentive package and improvements in flying activity rates among aircrews. The early signs are encouraging. As regards training, despite our current high operational tempo, the overall level for exercise and training of our Armed Forces remains, broadly speaking, at the level of previous years. We understand and take on board the concerns that have been expressed.
	The fourth pillar or theme is to sustain, which includes balancing commitments with our aim to commit personnel to operations for no longer than is strictly necessary. I mentioned our reduced contribution to ISAF in Kabul. Of course, there is little point in just withdrawing people before they can be replaced or before their jobs are done—especially if it means having to return later.
	We believe that we have achieved success in balancing the number of people committed to operations, although we acknowledge that there are pressure points in certain areas. I know that the noble Lord, Lord King, feels strongly that we have not necessarily reached the truth about those figures and he said so again today. Average unit tour intervals in the Army have improved. Overall, we are meeting the target of 24 months set out in the SDR for Army tour intervals and in some cases exceeding it. But let me make this concession: we are aware that some specialist units and individuals—notably in the infantry—may well have tours within that limit. We are committed to tackling the problem and I look forward to discussing the issue with the noble Lord and with others in the weeks and months to come.
	That is clearly interlinked with retaining personnel. We subscribe to the motto, "Recruit the man or woman; retain the family". That is particularly significant with the Armed Forces. Some 52 per cent of those in the Armed Forces are married with many more in long-term relationships. That is an important point.
	The fifth and final component of the strategy is "remember". It is about helping and supporting former service personnel and their families and bereaved families. Caring for our veterans is part of repaying the debt to our people who served this country so well. We have and are working closely with veterans' organisations. We have appointed a Minister for Veterans, a task being carried out with great sensitivity by my colleague Dr Lewis Moonie. He has assumed responsibility for the War Pensions Agency, now known as the Veterans Agency. The House will know how that is succeeding. There are and always will be issues relating to veterans and it is important that government should be pressured about whether they are doing sufficient for them. We believe that we have improved the position already.
	I was going to comment on equipment. In my view, some of the criticisms made today have been slightly unfair in relation to the state of the equipment budget in the MoD. There seems to be little acknowledgement of how outstanding our equipment is, particularly when compared with some of that used in other countries. I remind the House that our current planned naval equipment project represents the largest programme of new shipbuilding in decades. Apart from orders for six new Type-45 destroyers, Astute-class submarines and a range of support and amphibious vessels, we are now well advanced with our new aircraft carrier project. I can tell the noble Lord, Lord Chalfont, that that particular project is part of our programme. We expect to select a prime contractor for it early next year.
	The Challenger 2 main battle tank is now fully in service and we are making real progress with the introduction of the Bowman combat radio. Some might say, "About time", but, with great respect, they might say that to both Front Benches. It is not a situation that has suddenly arisen since 1997. However, I can tell the House that we are determined as best we can that the in-service date for a proper communications system—the Bowman system—is 2004. We intend to keep to that if we possibly can. We believe that the strength and diversity of our forward equipment programme provides ample evidence of our continuing commitment to ensuring that our Armed Forces have the necessary resources to carry out their tasks effectively.
	I want quickly to remind the House that under the current spending review the settlement for defence represents an increase in real terms of 1 per cent. That is not a large amount but it is a real-terms increase. I also remind the House, with the greatest respect to the Front Bench opposite, that that is the first sustained increase in planned defence expenditure for more than a decade.
	Of course we listen with enormous interest and respect to the former chiefs of the defence staff and other experts in the field, but as regards how much or how little we should spend on defence I am not sure that the party opposite has much to tell us when one considers its record.
	The results of the new spending review will not be complete until the summer and it is too early to speculate about what it might say. However, I want to welcome the Chancellor's announcement of the additional investment of £155 million to meet urgent equipment requirements for operations against terrorism and a further £204 million for defence in the spring supplementary estimates to meet operational costs in the financial year just ended.
	Today we have heard remarks about the Treasury. It is easy to pick on the Treasury and I was grateful when the noble Lord, Lord Lawson of Blaby, arrived in the Chamber. Apart from myself, under pressure as the Minister here today, he was the only former Treasury Minister to show his face in the Chamber during the course of the debate.

Noble Lords: And another there!

Lord Bach: My Lords, there are now many others but not many were here when some of the perhaps "un-Lords-like" remarks were made about the Treasury. Some of those remarks were unfair, although a number of references to decisions made this summer were welcome.
	I would have liked the time to answer the noble Lord, Lord Vivian, on what I fear has ridiculously become a party political issue; that is, the decision to retire increasingly obsolescent Royal Navy Sea-Harrier aircraft. Time does not allow for that now but the noble Lord, Lord Lyell, will be pleased to know that they are being phased out between 2004 and 2006. The fact is that that decision is sensible and capability-driven and will certainly not leave our Royal Navy in any danger. We on this side of the House greatly resent the fact that in another place that issue was used in such a politically partisan way.
	Having concluded, I hope, not on a sour note, I thank the noble Lord, Lord King, and apologise to him for having left him little time in which to respond to the debate.

Lord King of Bridgwater: My Lords, I wish very briefly to thank the Minister for his response. I am sorry that at the end he got into a little deep water on former Treasury Ministers—he found that they were rather thicker on the ground than he had realised.
	I shall start by apologising to and thanking my noble friend Lord Burnham. He initiated this debate and I am most grateful for his appreciation in spite of the mix-up over the printing. That, at least, is better than what has happened to my noble friend Lord Fowler, who as "Baroness Fowler" has been given 15 minutes to open his debate. At least we were not given a change of gender in our arrangements.
	At the start of the debate I had hoped that it would be one of real quality. I appreciate all those noble Lords who have taken part. Perhaps I may pay particular tribute to my noble friend Lord Black of Crossharbour. He made an outstanding maiden speech. If this House means something, then it is to bring to this place people of real experience and considerable knowledge who can contribute to our debates in the forceful and interesting way in which my noble friend has done today.
	I wish simply to say this to the Minister. When I was Secretary of State, there were always complaints about lack of funds. Sometimes, however, those concerns grow larger and more real. I would ask the Minister to do one thing. Will he ask his private office to ensure that tomorrow's Boxes for the Prime Minister, the Chancellor and the Secretary of State contain copies of this Hansard? A number of people have spoken in this debate whose advice the Government used to be pleased to receive when they were operating as Chiefs of the Defence Staff and in other capacities. They have given serious warnings, along with the chair of the Armed Forces Pay Review Body, the noble Baroness, Lady Dean of Thornton-le-Fylde.
	Having served in the other place, I have to say that that House could not have matched the quality of the debate we have heard today. I hope that Ministers will not read only the Hansard from the House of Commons tomorrow, but that they will read the House of Lords Hansard as well.
	Once more, I am grateful to all those who have taken part in what I think has been an excellent and most worthwhile debate. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.

Pension Policy

Lord Fowler: rose to call attention to pension policy; and to move for Papers.
	My Lords, like my noble friend Lord King I, too, noticed the use of "Baroness". I have to say that at least in the other place they did get my sex right, if nothing else.
	This is an important debate on pensions. My first serious introduction to the world of pensions took place back in 1975 when, suddenly and surprisingly, I was appointed to the Shadow Cabinet of my noble friend Lady Thatcher. My first debate was the pensions Bill, introduced by Barbara Castle, who we particularly remember today. Although I did not always agree with her solutions, by any standards she was an outstanding fighter for better pensions. She will be very much missed.
	A decade later, as Secretary of State for Social Services, I introduced my own pension changes. In the 1990s and to date I have served as a trustee on a number of pension funds. If there has been one constant feature of that time, basically it has been this: perhaps because of the complexity of the rules and regulations, and because for many retirement seems a distant prospect, pensions policy never receives the public attention that it deserves. In spite of the huge importance of pensions, too many people ignore the policy area altogether.
	Perhaps it is because of that attitude that we have almost drifted, like sleepwalkers, into the biggest crisis for pensions this country has seen for half a century. Policy changes like the abolition of tax credits, that have had a profound effect on the position of future pensioners, but are difficult to summarise in a 30-second soundbite, have slipped through only partly noticed. Equally, changes that should be made, such as in my view changes to the terms of annuities, do not get the mass support that they deserve because people do not understand precisely how they can affect their lives.
	All this has taken place in spite of the brave efforts of the financial and money pages press—to which I pay genuine tribute—to heighten public awareness in the area. So in this short debate I want to concentrate on occupational and personal pensions: the final salary scheme; the money purchase scheme. All too rarely have these matters been debated at Westminster. Obviously, state provision is vitally and vastly important. We had the opportunity to debate the State Pension Credit Bill a month or two ago. I supported that Bill. Indeed, I notice that my support has been called in aid by Ministers in the other place to such an extent that one veteran Labour Back-Bencher protested that it was all very well knowing I was in favour of it, but he had spent his best years opposing my policies.
	Nevertheless, I still believe that we should aim to reach maximum agreement on policies because, in terms of pensions, policies do not affect only the next three or four years, they affect the coming 30 to 40 years. The challenge we face today is, I believe, profound. The danger lights are all flashing very brightly indeed. Today we are in the position where people are not saving enough and where the personal savings rate has dipped alarmingly, back down to the levels of the 1930s. We are in a position where many final salary schemes are being closed to new members or closed altogether. These are not small companies. We are talking about Marks & Spencer, ICI, Safeway, Ernst & Young and many other like companies.
	We are also in a position where contributions to money purchase schemes are insufficient to ensure a good future income, not least because the incentives to save are inadequate. In human terms, I believe that we have here the makings of a tragedy. As one commentator put it: in the future, people in retirement will live "lives of quiet desperation".
	I think that there is another danger. My theory is that we are in danger of moving towards becoming two nations in terms of pensions. One nation will have inflation-proofed, final salary schemes, while the other nation will scrape along on inadequate pensions. That, again, would be a vast tragedy. My aim is not to set one nation against the other, but to see how we can move closer to a single nation where more and more people have the pensions and the savings to give themselves a good life in retirement.
	The declared policy of both governments over the past 20 years has been to promote personal provision. That makes obvious sense so far as concerns the individual; it is sensible for him to make provision for his future and give himself some security in that future. But in fact it also makes sense for the Government, the Treasury and those in charge of the nation's finances. People are living longer. The ratio of the working population to the retired population is set to worsen, and the state retirement pension is a pay-as-you-go scheme. There is no invested fund on which to draw, just the ability and willingness of future taxpayers to pay for future pensions. From any government's point of view, therefore, it makes sense to encourage people to save.
	That is one reason why the demise of so many final salary schemes is extremely serious for this country. In this respect we were once the envy, certainly of Europe and perhaps of the world, because we had such a wide range and prosperity in our final salary schemes. I do not claim that government policy alone has been responsible for so much decline. Obviously the financial reporting rule, FRS 17, has had an impact in this area, in particular the way in which it treats fluctuating investments as a market force. There is no question that it has had an impact. One needs only to talk to anyone who runs a pension scheme to know that that is the case. No one claims that FRS 17 has been helpful to occupational schemes.
	Frankly, however, I rather doubt that, had it not been for the Government's action in abolishing tax credits paid to pension funds in the 1997 Budget, that the financial rule would have had quite the impact that it has had over the past 12 months to two years. Confidence has been affected and much more. The Chancellor had pledged himself to making no direct income tax increases, so instead he made a tax change which directly hit the future incomes of millions of pension savers. It sounded technical—doubtless that was an advantage in the Budget presentation—but its direct result was to reduce the income received by pension funds directly. It costs pension savers £5 billion a year. I emphasise that it is £5 billion a year and continuing; it is not a once-and-for-all saving.
	Unlike pensions mis-selling—which we all deplored—there is no prospect of putting this matter right. It is a permanent change for the worse. The timing was such that it coincided not with a buoyant stock market, as the Chancellor apparently thought it would, but with a serious downturn in the market. It was a policy which affected not only final salary schemes but money purchase schemes such as the personal pension. Those funds were hit in exactly the same way.
	To rub salt into the wounds of people with personal pensions, the Government also abolished the carry forward provision which enabled self-employed people who had not contributed to a pension to their full entitlement to carry forward six years' entitlement—to catch up, if you like, at the end of their working lives. I could never understand that particular change of policy. It seemed a petty and unnecessary act.
	But worst of all, people with money purchase schemes were impacted not only by the reduction in income going into their fund but by a dramatic reduction in the pension that they could buy. Annuity rates have fallen dramatically. In the past 10 years, the income that a newly-retired person can receive for the same accumulated fund has halved. According to the Library note provided for me, in 1990 a £100,000 fund would buy for a 65-year old man, a 50 per cent widow's pension and a pension of £10,871. That figure is now in the region of £5,400.
	Not surprisingly, people in this position argued that the rule that compelled them to take an annuity—a low annuity; the lowest annuity for decades—by the age of 75 was unjust. In précis, the argument they put is that, provided they can prevent themselves slipping back on state support, they should not be so compelled. Regrettably, the Government have set their face against such change. They say that people can shop around for better annuities, but annuities they will have and nothing else.
	The Minister for Pensions, Mr McCartney, rejected any move for reform on the ground that it was only a problem for the rich and the very wealthy. Let me say, in the strongest terms that I can, that this is not only an issue for the rich but for the hundreds of thousands of people who do not remotely consider themselves wealthy.
	Government Ministers, who are also Members of Parliament, should be very careful about lecturing anyone on the subject of wealthy pensioners. The House of Commons and Ministerial Pension Scheme was already a generous scheme when I left the Commons last year. Since then, Members have voted for an accrual rate of one-fortieth in spite of the recommendation of the Senior Salaries Board. They have given themselves a full pension after 27 years as compared with the 40 years standard.
	To give a comparison, an MP who retires on a full two-thirds pension will receive more than £30,000 a year. The pension will be index-linked and there will be a generous widow's pension—and a Minister will receive a pension additional to that. To match that kind of pension as an annuity if you have a money purchase scheme would need a fund of well over £500,000. I suggest that few of those pressing for change have that size of fund. I hope that Ministers will not use the argument that wealthy pensioners are the only ones who are impacted.
	I hope that the Government will reconsider their policy. It is one of the few steps open to them to change the atmosphere surrounding saving for retirement. A move along the lines suggested in David Curry's Bill would be widely welcomed and enable us to move on to consider the many other important issues in regard to pensions—for instance, how to bring people who at present have no other pension but the state pension into having pensions of their own; how to improve the position of working women whose careers are interrupted by looking after their children. That is a point that I feel I should mention given my description on the list of speakers. I am sure that it is a point that Lady Fowler would wish to make.
	Even raising the maximum retirement age to 70 could be considered. I gather that the idea of retiring at 70 is regarded as "political dynamite". It may perhaps be easier to say this in this House than down the Corridor, but many of us want to go on working until 70 and beyond. In my review of pensions in the 1980s I advocated a decade of flexible retirement between the ages of 60 and 70. We could go back to that.
	There are big issues to face. In my view, the first priority is to re-establish a savings climate. Confidence has gone. Removing the rule on compulsory annuities would be a giant step towards changing that climate back again. It would act as an incentive, not a disincentive, to savers. We should recognise that we face a crisis in pensions. Government policy should be aimed at re-establishing confidence and providing incentives to save. My Lords, I beg to move for Papers.

Lord Lea of Crondall: My Lords, I welcome the debate but, to use the old phrase, it is all in the way you tell it. In his introduction, the noble Lord, Lord Fowler, put a somewhat one-sided take on many of the problems which undoubtedly face us all. For instance, retiring at 70 would be all very well if everyone had a job until 70 and a magnificent pension at the end of it, but I suspect that some of the people who say these things in a glib and facile way think that it is another way of cutting the pension provision.
	To say that this is all to do with government policy is, again, a gross distortion of the reality. It implies that it has nothing to do with rapacious directors who, for example, double their own pension—and it is not now peanuts, as I shall explain in a moment—and then cut the provision for everyone else.
	I shall refer to the tax regime and make some comments on the lack of balance in the reporting of the difficulties in regard to final salary pensions and so on.
	We need to revisit the structure of tax expenditures but a problem that has not yet been mentioned is that tax expenditures cannot be isolated from the growing inequality of original income in society. It is very difficult to lay on the pension system the ability to regress the inequalities of the original income system.
	Original income inequality has been growing. We have now gone back to the immediate pre-Second World War distribution so far as concerns the top decile/bottom decile ratio of original income. I say the Second World War, but I fear that if things carry on as they are some people may say that the free market, world-globalised economy requires us to go back to the pre-First World War distribution of income. That would have devastating consequences for the subject we are discussing and make it more difficult to address the problem of poverty traps.
	In speaking about the problems of the current taxation system, I draw on the work of Dr Ros Altmann. At present tax relief is over 1 per cent of GDP—around £13 billion a year. About half of that sum goes to the top 10 per cent of taxpayers. That amount of £6 billion is greater than the expenditure on means-tested benefits for the elderly and around one-third of the cost of state pensions. Using the tax system as a means of encouraging savings, as at present, is regressive, inefficient and illogical. It lacks transparency to those contributing to pensions and to those trying to evaluate or change the effects of government expenditure.
	Far more public money is being spent on incentivising the highest income groups—they would probably save anyway—than on lower income groups who need the most encouragement to save. We need to improve the incentives to saving and to move away from the present tax system to incentivising savings. We should use the £13 billion currently spent on tax relief for pensions to finance an equal benefit or cash payment into the system. It could be based on monetary amounts of saving, with annual, or even lifetime, limits. Those government payments and saving limits would not be determined by income level or age. Everyone would receive the same financial incentive to save.
	I can give noble Lords an example of how that works and how tax relief exacerbates wealth inequality. Let us take a 20 per cent taxpayer who puts in £12 a month for 30 years and a 40 per cent taxpayer who puts in £12 net a month for 30 years. For the 20 per cent taxpayer, the Government put in £3 a month on top; for the 40 per cent taxpayer the Government put in £8 a month on top. Over 30 years the 20 per cent taxpayer receives £1,080 and the 40 per cent taxpayer receives £2,880. So at 5 per cent growth for the 20 per cent taxpayer, the pension pot is £12,280, an increase of 184 per cent; and for the 40 per cent taxpayer, it is £16,373, an increase of 279 per cent.
	I put it another way. If one takes a pension fund of £10,000, with £2,500 taken as a lump sum, the 20 per cent relief gives a £500 subsidy; the 40 per cent relief ultimately gives £2,500 subsidy. In other words, some formerly high income groups receive five times more subsidy from tax relief on pensions than low income groups.
	I turn to the problem of final salary schemes. For an employee on average wages, an employer typically pays over £2,000 less a year into a DC scheme than a final salary scheme. An employee would need to pay an extra £40 a week to match the level of the employer contribution, but the DC scheme does not guarantee the same level of benefits on retirement.
	In 1991 there were 5.6 million private sector employee members of final salary schemes. Projecting the decline forward, the figure has probably fallen to about 3.8 million. In most cases employers are replacing final salary schemes with defined contribution schemes, group personal pension schemes or stakeholder schemes. In a few instances such as Tesco, Nationwide and Pensions Trust different benefit approaches have been adopted. However, if current trends continue, the UK is heading towards a system in which DC dominates—where the employer pays much less into the pension.
	A large number of companies have said that final salary schemes have become too expensive to run. It is true that with a background of poor investment returns, increased longevity and low inflation pension costs have risen. But it must be remembered that such schemes have in the recent past been very cheap. Most employers running final salary schemes have used the surplus generated in their fund by investment returns to reduce or stop altogether the contributions they pay in. According to Inland Revenue statistics, between 1987-88 and 2000-01 the employer took contribution holidays of £18 billion. That means that employers saved around £4,000 per employee scheme member. It is striking how contribution holidays typically favour employers over employees. Overall just over 94 per cent of surplus was used either to reduce employers' contributions or give them a contribution holiday.
	The shift away from defined benefit schemes is often talked about in the same breath as longevity. Because people are living longer it is becoming more expensive, and so on. But the reality is that simply changing the type of pension provision does nothing to address the problem. An employee in a typical DC scheme will still work for the same number of years as a colleague in a DB plan and hence will have the same time to contribute. All that happens when the switch to DC is made is that the responsibility for dealing with longevity and associated costs is shifted from employer to employee.

Lord Freeman: My Lords, the House will agree that this is an important subject. I congratulate my noble friend Lord Fowler on raising the issue. I pay tribute also to the innovation which was entirely his responsibility in the early and mid-1980s—the introduction of what were then called portable pensions. We now know them as personal pensions. Despite the problems of mis-selling—those are nothing to do with the concept—they have proved of great value in an economy where there is much greater mobility of the labour market. I do not wish to repeat any of the points made by my noble friend Lord Fowler but to deal with some of the practical issues which the Government and society need to address in order to increase our savings for retirement. I declare an interest as chairman of the trustees of a number of pension funds in industry.
	Perhaps I may make some points to strengthen the powerful argument deployed by the noble Lord, Lord Fowler. Markets are changing. It may be that the cult of the equity that we knew for almost 30 years from the early 1970s may be drawing to a close and that the real rate of return available for those who were saving through a pension fund—their own or a company's—will fall in real terms which have nothing to do with inflation. I am struck by the fact that if the real rate of return on equity investment falls from the 7 per cent annual compounded rate which existed for 30 years up to the year 2000 to, let us say, 4.5 per cent, a man aged 30 contributing 10 per cent of his salary would receive only a quarter of the final salary in real terms on retirement at 60. So if one contributes 20 per cent and is taking only a personal pension with perhaps a modest employer contribution, 20 per cent is a very sizeable chunk of disposable income. A 20 per cent contribution rate would get one to something like half one's final salary on retirement.
	Those are worrying figures. My noble friend Lord Fowler and the noble Lord, Lord Lea, referred to the fact that defined benefit schemes may be on the wane and defined contribution schemes are being more widely used by industry. The gross contribution rate by the employer and employee on the defined contribution schemes is by no means as significant as it is for defined benefit schemes—final salary schemes—and there is, therefore, a reduction in the volume of saving. That is also worrying.
	It is sometimes suggested by those who have studied the problem that the answer is greater compulsion for us all to save over and above national insurance contributions. I am not sure that that principle would command very much support on these Benches partly because it would be bound to be redistributive and it is better that that should be done through the tax system; and it is unclear how much the state would pick up in terms of obligation for those who cannot or would not pay a much higher compulsory level of saving. As my noble friend Lord Fowler said, the answer lies in encouragement: we should try to encourage private sector schemes.
	I shall deal briefly with four aspects. The first is the confidence that savers have in our system; secondly, the need for simplification of pension provision, which is one of the most regulated aspects of our lives; thirdly, improved marketing; and, finally, some innovation. On the subject of confidence, I should mention the Myners report. Paul Myners wrote the Review of Institutional Investment, which is an excellent report. It was accepted by the Government last year in full. I believe that some aspects of that report have been submitted for consultation. In her response, perhaps the Minister would be kind enough to indicate the sort of timetable that we could expect following the end of the consultation process on legislative change, the responsibility of trustees, the independence of the custodian, and the activism by investment managers—and, indeed, trustees—in dealing with their investments and their responsibilities for them. Can the Minster also say when we are likely to receive a conclusion, and how the Government intend to legislate?
	Secondly, on the subject of simplicity, noble Lords will recall that Mr Alan Pickering was appointed to study the simplification of regulation. I believe that he is due to report back in the summer, but it would be helpful if the Minister could confirm that that target date still applies. Can the Minister also confirm that the Pickering review will march alongside—and, indeed, take note of—the conclusions of the second Inland Revenue review that is also under way?
	The calculation of the guaranteed minimum pension, and the annual assessment of the minimum funding requirement, are, I believe, outdated. I believe that the Government have indicated that the minimum funding requirement administrative burden will shortly end. Both have done their job; and, in my judgment, should go. There are requirements for an independent financial adviser in most pension decisions, including some very simple stakeholder pension provision. For example, if a company wishes to make a contribution to a stakeholder pension for an employee without the latter having to make a contribution in, say, the building trade industry, that company cannot explain the significance and benefit of that contribution without an independent financial adviser being brought in. That is another example where we need to reconsider the need for an independent financial adviser in all circumstances.
	Thirdly, I move on to marketing. I very much welcome the Secretary of State's interest in encouraging competition in the annuity market, and the provision of simpler pension products. We await the report of the Sandler committee with great interest. The reported interest of the Secretary of State in trying to emulate the former PEPS, and now the ISA concept, for pension provision, both of which are very simple mechanisms by which people can save a modest amount each week or month, is excellent. I shall be interested to hear the Minister's observation—if not today, then perhaps in writing—as to whether the Government would reconsider the proposal that all those who are in pension schemes should receive a reminder when they reach the ages of 30 and 40 of the prospective pension provision that they have so far earned.
	Finally, on the question of innovation, I believe that a little lateral thinking is required in terms of the tax regime. Most of us accept that changes must, or should be, made—at least on the basis of tax neutrality with no loss to the Exchequer. However, a little lateral thinking would be welcomed in terms of restricting the relief on ingoing contributions—perhaps from the marginal rate to the standard rate for the higher rate taxpayer—in return for greater flexibility of annuity payments. I am speaking personally here, and obviously not for my Front Bench. I very much look forward to hearing the Minister's response.

Lord Oakeshott of Seagrove Bay: My Lords, I declare my professional interest, as noted in the register, as an investment manager for pension funds for the past 26 years. I start with a direct question to the Government about the financial crisis facing pension funds that the noble Lord, Lord Fowler, described so clearly in his opening remarks. In March, I tabled two simple Questions for Written Answer. The first asked Her Majesty's Government:
	"How much income pension funds in the United Kingdom have lost through the abolition of dividend tax credits on their holdings of ordinary and preference shares in each of the financial years 1997-98, 1998-99, 1999-2000 and 2000-01?".
	The second asked:
	"What has been the outturn of the estimated year-by-year revenue effects of the July 1997 Budget tax measures to abolish payable tax credits for pension schemes and United Kingdom companies from Budget day and changes for everyone else from 6 April 1999, as set out in Table 2:2 on page 40 of HC 85 (1997-98)?".
	The Written Answer that I received was a classic of its kind:
	"The Government's package of corporation tax reforms included measures to boost corporate investment by removing tax distortions. The withdrawal of payable tax credits on dividends was just one part of these measures. Pension funds and others will share in the long-term benefits from these changes to corporation tax. The overall effects of these changes on pension funds will depend on a variety of factors, including the type of scheme paying the pension; the take-up of private pensions; the level of future pension contributions; pension schemes' asset allocation and investment policies; and investment returns generally".—[Official Report, 19/3/02; cols. WA 131-2.]
	So-called "Answers" like the latter are an insult to anyone's intelligence. If an idle undergraduate had served them up to the Minister during her distinguished academic career, I believe he would have got pretty short shrift. When the Chancellor of the Exchequer has given estimates for the amount of revenue likely to be raised year by year, rising from £2.3 billion to £5.4 billion, in the official statement accompanying a Budget, proper scrutiny and accountability demand that the Treasury now comes clean with the facts. In 1997, it forecast how much money a major increase in taxation would bring in; it is now 2002, and we are entitled to know whether the forecast was right or wrong. I trust that the Minister will use her skills of persuasion to squeeze a proper Answer out of the Treasury in the near future.
	Until the year 2000, the Chancellor got away with his raid on pension funds because the markets were riding high and funds were still enjoying the cushion of the surpluses build up in the prosperous 1980s and 1990s. Indeed, he put it very well himself in the 1997 Budget speech in defending the abolition of tax credits when he said:
	"Many pension funds are in substantial surplus and at present many companies are enjoying pension holidays".—[Official Report, Commons, 2/7/97; col. 306.]
	How the world has changed.
	The period 1980-2000 was a golden age for UK equities, with returns averaging 12 per cent a year real, above inflation—the only 20-year period on record since reliable statistics began in 1870. But now we are in the lean years. It looks quite possible that 2002 will provide a third consecutive year of negative real returns on UK equities for the first time in 40 years, now that the surpluses from the fat years have all been used up. The change in accounting standards, to which other noble Lords referred, with the adoption of FRS17 (so that companies have to show the effect of changing pension fund surpluses or deficits on their balance sheet each year), is not in itself the problem: it merely highlights it.
	How should society adjust generally to the dramatic increases in life expectancy that we are witnessing throughout the western world? Last week, some noble Lords may have noticed that the Guardian reported an amazing statistic; namely, that a baby girl born in France on that particular day had a 50:50 chance of living to the age of 100. The other key statistic in that paper by scientists at Cambridge and Rostock was that life expectancy in most developed countries has risen in a straight line by one year in every four—that is, three months of life expectancy for every year going by—over the past century and a half, ever since a study showed an average life expectancy of 45 for Swedish women in 1840. Governments, on received actuarial wisdom, keep believing that this trend is about to change. Well, it might. However, on this evidence that is not the way to bet.
	It seems to me that no political party has begun to come to terms with this change in life expectancy. We on these Benches officially favour a flexible decade of retirement, as mentioned earlier by the noble Lord, Lord Fowler, rather than a fixed retirement age—that is a start. But if these trends in life expectancy continue, there is no way that people will be able to save enough for their old age, or, indeed, that society will be able to care for them if they are in poverty or need long-term residential care, if we expect to be able to spend 30 or 40 years on average in paid work and then live on a pension for almost the same time again. The numbers just do not add up.
	Speaking for myself, I make three suggestions that I hope may help solve the pensions problem in the longer term. First, and most simply, 75 is now far too early an age for people to be forced to turn their pension money into a fixed annuity.
	Secondly, to make some amends for the money grabbed from pension funds by the abolition of the dividend tax credit, standard rate taxpayers should be made eligible for higher rate tax relief on their contributions to approved pension schemes. We must encourage people on average and below average incomes to save much more. Why should not all employees receive the same tax break for their hard-earned pension contributions as higher rate taxpayers whose needs are less?
	Thirdly, all compulsory retirement ages should be abolished. A person of 65 or 70 today may well be in far better health than a typical 55 year-old a generation ago. Fixed retirement ages are nonsense. Why are people not allowed to start drawing the pension that they have earned while continuing to work for the same company, perhaps in a less senior or demanding job, where they can still make a useful contribution?
	Twenty-six years ago, when I was about to start my career in pension fund investment, I went for an interview with the chairman of Warburgs. I thought he had a lively mind and asked penetrating questions, and I got the job. He was then 68, so I was glad that he had not been compulsorily retired. Last year, I joined the Select Committee on Economic Affairs and saw a familiar face. The noble Lord, Lord Roll of Ipsden—who I am sorry to see is not in his place—is now 94, and is still at least one jump ahead of the rest of us. I hope that he will not mind my using him as the supreme but not the only example in this House, with an average age of 69, in terms of the invaluable contribution to our society of people above retirement age. How much poorer we are both financially and in every other way if we bind ourselves in the straitjacket of compulsory retirement at fixed age limits.

Lord Desai: My Lords, I have no practical experience of anything. Therefore, I shall stick to the high ground of theory in relation to pensions—except in so far as I look forward to my pension in a couple of years' time; and I hope that my pension fund does not renege on the agreement.
	As was pointed out in the excellent introduction by the noble Lord, Lord Fowler, and in speeches thereafter, we face the impossible problem of guaranteeing the next generation of people who will retire the sort of pension income that we shall enjoy. There is no way to hide the fact that they will not have it as good as we do. We are the last lucky generation. We need leadership to be able to explain to people that the pension contract was conceived at a time when people worked for many years and lived for only a few years after retiring, so as a way of rearranging one's lifetime income across a consumption stream which lasted beyond one's working years it was a doddle. People lived about six years beyond retirement age when Beveridge introduced his scheme.
	Now, we have the much bigger problem of financing a longer retirement from a shorter working span—because of higher education needs and so on—but also in most cases from interrupted rather than continuous employment, especially at the lower end of the scale.
	The numbers just do not add up, no matter whether the sums are done by government or by business. Therefore, we all have the task of explaining to people in words of one syllable, first, that they will have to save more and that the state will not bail them out—there is no way in which the state can bail them out; and, secondly, that they will have to work many more years, thus shortening their retirement age—they may be able to work half of the time or part-time. Thirdly, we must explain that almost any long-term promise that is made to them will not be fulfilled. What we have learnt over the past 30 years is that the kind of pension contracts that firms thought they could offer are not sustainable. That is the story of Equitable Life: the company offered a contract that was not sustainable. What seemed rational when the equity markets were very high and rates of return were either 7 or 12 per cent, depending on the number of decades, is no longer possible.
	It is not that we are not going to recover easily; but even if we do recover, all we can say is that life in 10 or 20 years' time will not be as it is now. Therefore, when someone offers a 30-year or 35-year piece of paper, it will need to be examined with great care. The same is true of endowment mortgages.
	One reason for this, apart from longevity, is low inflation. We worried so much about high inflation that we did not think of the bigger problem that would be brought about by low inflation. To some extent, while the real rates of return in the economy at large have not gone down that much, in terms of financial portfolios things have changed remarkably in equities and bonds.
	To some extent, as has been said in debates on globalisation, we are in effect going back to how things were in the 19th century. In those days, people saved in consols, which yielded some 2.5 per cent. We have returned to that world, and we must revive Victorian savings habits—or, at the other end of the scale, Victorian habits of poverty. I am sorry to put it so bluntly, but I do not know how we are going to manage. I have the occasional sleepless night over the fact that no one has explained these matters.
	We are far too caught up in institutional details—decisions about types of schemes or what the Government did or did not do. This is not only a British problem; it is a problem for the entire developed world. We have made promises. Our children will see that their parents had a good time and will want the same. We just have to tell them that it is too late; it will not happen.
	There are two possible saving graces. First, it is to be hoped that our money can be invested in the third world, where there is a young and growing population and a skilled labour force. If we can match our capital with third world labour, we can achieve a slightly higher rate of return than we can achieve at home. It is not foolproof, but perhaps in the long run that is the only strategy for the developed world. Secondly, the cheap manufactured goods that have arisen as a result of globalisation are giving us a higher real income than we should otherwise have had.
	So it is not unreasonable to expect the younger generation to save more. We have been through a period of hyper-inflation. They will not go through such a period. That is one reasonable long-term guarantee that one can give—unless the globalisation process is massively disrupted. We must engage in a partnership with the third world and sustain a free trade regime. But we must also tell the next generation—and leadership is needed to say this—that the only solution to their problems is themselves. No one else will help them.

Baroness Greengross: My Lords, this is a timely and important debate. I thank the noble Lord, Lord Fowler, for introducing it. Perhaps I may add my tribute to Lady Castle. To the very end of her life, she was the most doughty campaigner—and in particular for the state pension. Her legacy must be that that remains the bedrock of pension provision, because so many people believe in it.
	Perhaps I may comment briefly on the acres of newspaper coverage of the crisis and the dire warnings that we have all read. They are there. We are dealing with the implications of increased longevity—eloquently referred to by the noble Lord, Lord Oakeshott. I want to add two points.
	In this country, by 2026, we there will be more people of 65 and over than there will be children under 16. With regard to people reaching their 100th birthday, at present there are 7,000; by then, there will probably be 36,000. If the Queen continues to send telegrams to congratulate anyone who reached his or her 100th birthday, she will have to send 100 every day. That illustrates what is happening. This is something to celebrate, not just something to be desperately upset about. Most of us would like to live for as long as we can be healthy and active. The big change is that most of our older population can do so. That is excellent news, but I agree with the noble Lord, Lord Desai, and with everyone else who has stressed that we have to plan how we are going to cope with this huge change.
	That is our challenge. We have to plan for the longer term, which is usually difficult for governments because everyone is preoccupied with the next five years. There have been some recent examples of long-term planning, such as the DTI's Foresight Panel on Ageing which looked a long way ahead. That is an example of what needs to be done more.
	The Government have a good record of looking at the needs of today's older people. They are beginning to do quite a lot. Many of today's older people are far better off through increased state pension, benefits and additional resources poured into the NHS, from which they will benefit without having to contribute if they do not pay national insurance. We have only just sent the State Pension Credit Bill to another place. There is a lot of concern about its cost and complexity, but it is an attempt to meet the twin aims of rewarding thrift and providing a higher minimum income. Despite the complexity, the Minister and the Government have not been given the credit for the reform that it represents, getting rid of the assumed income calculation, capital limits and the feelings often eloquently expressed by older people to me and to many others wondering why they bothered to save because they would have done better had they spent all their money.
	This Government, in line with all their recent predecessors, have tried to target help where it is needed most. I hope that the reforms that have been made will mean that we now move away from the language of means-testing to that of entitlement. That is very important. That is where the new Pension Service must work.
	I note that targeting has been somewhat diluted by the amount of money now spent on the winter fuel payments and free TV licences. Wealthier pensioners benefit from those payments, too. Raising the tax allowances for pensioners benefits only those who are wealthier, because the vast majority of older people still do not pay tax.
	It is wrong to think that the state pension was ever very generous. Even before the link with earnings was broken, the state pension was not adequate on its own. I am rather disappointed that the Government have not found some compromise way of meeting the legitimate concerns of British pensioners who live abroad where the state pension is not uprated. It would be a shame if the Government were forced to do that by the recent High Court case rather than because they felt that it was correct to do so and would be discriminatory not to. Can the Minister tell us any more about that?
	It would be wise if the Government would make public what they consider to be a reasonable income for older people. Many organisations, including Age Concern, which I represent, believe that it would be helpful to give people an indication of what they can expect, what they need to save and how the future for them and their longevity can be better planned. Knowing what a reasonable income for older people should be does not mean that the Government have to provide all that income. It would be prohibitively expensive to do so and would act as an even greater disincentive to saving for retirement. People need to know well in advance what they need to do.
	There is a great deal of misunderstanding about pensions. We need a massive programme of education to explain what pensions are and what they are not and cannot be. We know that they are a form of saving and deferred pay to live on after paid work ceases, but pensions seem unnecessarily complicated and a lot of people are very confused by them—including, very often, the so-called experts.
	I share the concern expressed by the noble Lords, Lord Fowler, Lord Oakeshott and Lord Freeman, about annuity rates and their fears for the future of the private pensions sector. I am very worried about the lack of flexibility on when someone can draw part of their pension. The Government have been promising for a long time to look at that and we are still waiting to hear about it. We need flexibility on how and when we retire and on taking part of our pension without being penalised for doing so.
	People are understandably and justifiably anxious about the switch to defined contribution schemes. I share those feelings. The good thing about such schemes is that they will encourage greater flexibility in the labour market, as we increasingly move towards a situation in which more people leave one job, are out of work for a while and then go back into work. However, that is only one good thing and there are many other reasons for anxiety.
	The Government have added to that complexity—inadvertently, I am sure. That is a shame. We need simplification. We have to rethink fundamental issues such as the age of retirement, which should be higher, and the age until which people can work. Age discrimination legislation will make it undeniably certain that we cannot continue to have a fixed age at which people stop work. We shall have to look at competence testing and not defining people by their age. We need to look at the age at which people can afford to retire or be allowed to take pension benefits in a really flexible way. We also need to encourage community interest and volunteering, not only paid additional work.
	We all know that the answers are very difficult, but they are essential. We need a blueprint for longer-term action. It is essential that we get that in time for us to be able to celebrate increased longevity instead of thinking of it as a disaster.

Lord Varley: My Lords, I am grateful to the noble Lord, Lord Fowler, for introducing the debate. Everyone who has spoken so far is an expert in their field. The noble Lord, Lord Fowler, is a former Secretary of State. The noble Lord, Lord Freeman, still has day-to-day experience in the pensions industry and the noble Lord, Lord Oakeshott, has vast experience of occupational pension schemes as a fund manager and investment manager.
	I am not sure that I subscribe to the use of the word "crisis" by the noble Lord, Lord Fowler. I do not think that the situation is necessarily yet irrevocable. Things can be put right, but there is certainly cause for concern at the present situation. Hardly a day goes by without some comment in the newspapers about pension policy. The controversy in the main is about the occupational pension scheme policy. There is speculation about whether more companies will abandon their final salary schemes for an inferior alternative and about whether whatever replaces final salary schemes will provide adequate pensions and whether the pensions in payment will hold their value in the years ahead.
	There is a great deal of solid evidence, already referred to by the noble Lords, Lord Fowler and Lord Oakeshott, that people are not saving enough to ensure adequate resources when they reach retirement age. The savings ratio—the proportion of household income that we save as a nation—has gone down to a paltry 3.75 per cent and is now at the lowest level on record. People are spending practically up to their limit. If the debt on credit cards is anything to go by, they are going over their limits. People are not attaching due seriousness to the need to make provision.
	If the current strain on final salary occupational pension schemes is not relieved, if more schemes are withdrawn, and if action is not taken now, the problem of inadequate income in old age, to which the noble Baroness, Lady Greengross, referred, could place an intolerable burden on the state. However, it is wholly unfair to place the blame on the Government for the fact that companies are abandoning final salary schemes and opting for inferior schemes. The most significant factor putting final salary schemes under strain is the collapse in the value of pension fund investments. That is by far the largest factor.
	Two and a half years ago, the Financial Times index of 100 leading companies stood at almost 7,000 points. Today, the FTSE is just over 5,200. So, in a relatively short time, 35 per cent—more than one third—of the value of equities in pension funds has been wiped out. As the House knows, pension funds invest heavily in equities. Between 1992 and 2000, there was an unprecedented growth in stock market valuations. In fact, the noble Lord, Lord Oakeshott, produced an even better figure to demonstrate how successful equities had been in an earlier period. Only five years ago, many occupational pension schemes were not only well funded, but taking a contribution holiday—an employer's contribution holiday or an employee's contribution holiday, and in some cases both. If the stock market improves as the global recession is overcome—and there are some signs, I hope, that that is happening—the value of occupational pension fund investments will improve also.
	Some noble Lords, including the noble Lords, Lord Fowler, Lord Freeman and Lord Oakeshott, have harked back to the changes that the Chancellor made in his first Budget to advance corporation tax, or tax credits, as they are called, which took £5 billion annually out of pension funds. At the time, however, I did not hear great howls of anguish coming from pension fund managers or pension fund trustees—

Noble Lords: Oh!

Lord Varley: I did not, my Lords. There was a bit of a row, but nothing like there is now. There was nothing like we see now in the press, where someone called Wheatcroft regularly writes about these issues. She was not writing at the time about these issues in the pages of The Times. However, I am ready to concede that there has been a significant deterioration of the stock market, and that the tax concessions which the pension funds used to receive but no longer receive have added to the problem. The latter, however, has had a less significant effect than has the reduction in equity values. But I had better move on so that I can make my main point.
	There is one aspect of pension policy that is bizarre and unfathomable to me—the application of Inland Revenue limits to pension increases paid under some annuity policies. During the 1980s and early 1990s, the trustees of many medium-size occupational pension schemes purchased annuities on behalf of their members when they retired. Some of the contracts with the annuity providers—mainly the large insurance companies such as Norwich Union, Prudential, Legal and General, Clerical Medical and all the others—stipulated that there would be a 5 per cent annual up-rating of the annuity paid directly to the pensioner annuitant.
	As the House will recall, in the 1980s and 1990s, the year-on-year inflation rate often greatly exceeded 5 per cent. Under this Government's financial management, aided by the Bank of England Monetary Policy Committee, inflation is now well under control. However, the Inland Revenue limits mean that current annuities are capped at 3 per cent. A great deal of the income generated by the original lump-sum purchase of the annuity which the insurance company would have invested in gilt-edged securities is locked up and retained by the insurance companies and may never be released for the benefit of the annuitant or the Treasury.
	I ask my noble friend the Minister whether that will be looked at seriously. We have a situation in which, because of that cap, the Treasury voluntarily forgoes revenue—which I estimate amounts to millions of pounds—that it could have. If the cap were lifted, depending on the marginal tax rates, up to 40 per cent of the money would go to the Treasury. The Chief Secretary to the Treasury has acknowledged that this is a problem. I wrote to him some time ago and he pointed out that there would be a review. I hope that the review will consider the matter seriously, and I hope that my noble friend, in her reply, will give us some hope about it.
	The debate on pension policy will run and run. As people live longer, the demands on pension funds, both private funds and public funds, will become much more burdensome. I wish my noble friend the Minister and all her colleagues in government the very best in putting this issue right as quickly as possible.

Baroness Turner of Camden: My Lords, I thank the noble Lord, Lord Fowler, for introducing this timely debate on pensions policy. It gives me the opportunity to pay a personal tribute to my noble friend Lady Castle of Blackburn. Had she still been with us, I am sure that she would have made her usual robust contribution.
	It is very rare that even talented politicians—and my noble friend was certainly that—can be said to have materially changed the lives of fellow citizens, and to have done so for the better. Yet she did so in many ways, not least because of the pensions plan which she was responsible for introducing in the mid-1970s. The two-tier system—with SERPS, which was a major innovation—truly did change lives for many people. It really was a partnership between good private and good public provision. Had it been honoured and fully implemented, the commitment to increasing the basic state pension in line with the earnings index, instead of simply the retail prices index, taken together with the original modified SERPS, would have ensured that there would today be very few poor retired wage earners. I supported Lady Castle in the pleas that she repeatedly made for a return to the philosophy that underpinned that innovatory plan of hers.
	The last time Lady Castle spoke in this House it was on the State Pension Credit Bill. She was rightly critical of it, since she saw that it would ultimately mean that about 50 per cent of future pensioners would attain some kind of basic income only via means-testing. She was opposed to that, believing that as well as being expensive to administer, means-testing inevitably entailed low take-up. To her, means-testing was an affront to the dignity of older people.
	However, another aspect to the Castle plan had a very considerable impact. It was possible to contract out of SERPS only if a better occupational alternative was available. That of course meant a scheme offering defined benefits—a final salary scheme. I well recall, as I was a union official at the time, that that led to a growth in final salary schemes, often taking the place of existing money-purchase plans.
	The occupational pensions movement has been responsible for one of the great successes of the past century. As a result, many people have been able to retire in comparative comfort. That does not mean, as the Government sometimes assert, that there are masses of rich pensioners—only 5 per cent of the pensioner community pays income tax at the higher rate—but at least a modest level of comfort has been secured. Incidentally, what level do the Government regard as wealth for a pensioner? The noble Lord, Lord Fowler, made that point. I ask the question because, although the tax system provides for modest age allowances, the taper at which entitlement to age allowances is lost begins at £17,900 a year, which is not exactly wealth. If one earns a little bit more, entitlement is lost entirely. There is sometimes an assumption that life is cheaper for a pensioner than for the working population. I say to my noble friends on the Front Bench—they may find this out for themselves eventually, as I have already—that that is a mistaken assumption.
	We now have another pensions crisis. As we have heard, large companies are increasingly turning away from providing adequate occupational pensions for employees. It is clear that state provision will not be an acceptable or viable alternative. It is also government policy to reduce the state commitment to funding pensions and to move as many as possible onto the private sector. Hence stakeholder pensions where individuals take responsibility for themselves and rely on the market. Take-up so far has been disappointing. It is clear also that many people have no idea just how much they are going to have to put away to be sure of a reasonable, indeed, a liveable, income in retirement. It is estimated that a pension pot of over £200,000—an enormous figure to most people—would be needed in order to produce a modest income of around £10,000 per annum.
	There is no compulsion for people to pay into such schemes and an employer does not have to pay either, simply to allow a stakeholder provider access to his workforce. In the meantime, as we have heard this evening, many large firms such as BT, Sainsbury's, Whitbread, ICI and Lloyds TSB are shutting down their defined benefit schemes and offering a much poorer alternative in the shape of a money purchase scheme. Shortfalls in pension funds have followed "contribution holidays" employers gave themselves during the stock market boom. There is the falling stock market. There is the withdrawal of relief from advance corporation tax, which no doubt added substantially to the Treasury's coffers but further undermined middle level pension schemes.
	The new accounting mechanism known as the Financial Reporting Standard 17, already referred to by the noble Lord, Lord Fowler, is claimed by many companies to be a factor in their decision to move away from final salary schemes. There is no doubt at all that the moves away from defined benefit schemes have set alarm bells ringing among employees and their unions. My own union, MSF, now Amicus, has called for government intervention to prevent what many employees regard as a kind of theft.
	Certainly there is a need for a further review of pension policy. I believe it to be unrealistic to expect people to take on much more added responsibility for pension provision individually, particularly at a young age when it is most advantageous for them to do so. They are certainly unlikely in my view to do so voluntarily. The stakeholder experience would appear to demonstrate that. Young people endeavouring to get a footing on the housing ladder in large towns are unlikely to be willing to set aside money for a retirement in 40 years' time.
	Now financial advisers are advising their clients to get into SERPS. Perhaps the time may come when we shall look again with favour on the scheme introduced more than 25 years ago by the remarkable lady to whom I have sought to pay tribute this afternoon.

Baroness Barker: My Lords, I declare an interest as I work for Age Concern England. I, too, pay tribute to Lady Castle. In the short time that I have been a Member of this House I have witnessed her in the Chamber looking physically frail but standing up and laying into all before her, specifically those directly before her, with passion and vigour on the subject of pensions. Some in the House may have dismissed her views as being out of time. However, it is worth noting that during the previous Parliament pensioners were the only group to prise open the coffers of the Treasury. It was due to the leadership of Lady Castle that they were able to do that. Many of us did not agree with her politically but I think that all of us admired the fire and the passion with which she pursued the subject of pensions, seeing them as a key to overcoming poverty.
	When pensions make headline news day after day and are as likely to feature on the "Today" programme as "Moneybox", something is badly wrong. It is therefore timely that we should have this debate so forcefully introduced by the noble Lord, Lord Fowler. It is a welcome opportunity to talk about pension policy outwith specific government proposals. As noble Lords have mentioned, across all industrialised nations the dependency ratio of pensioners to people of working age is increasingly fuelling a trend towards private and pre-funded pensions. But here and in the USA the private sector seems to be increasingly problematic. In the climate of today's headlines it is tempting to focus solely on the subject of occupational pensions but I believe that that would be wrong. In order to avoid the position where government provision is always seen as the thing to which people run in times of crisis, we need to look at the way in which public provision sits alongside private provision.
	The noble Lord, Lord Fowler, mentioned the key word "confidence" and referred to the lack of confidence in the pensions industry. I believe that it is right to say that since 1979 some of the lack of confidence has resulted from the ways in which the state provision has been administered. I do not wish in the presence of so many eminent people to go over the details of the changes that were made to SERPS or the mis-selling of the 1980s or, indeed, the changes introduced in the Social Security Act 1986, but it is clear that the changes which those policies brought about—a total of £32 billion was taken off the value of public pensions—have been, and will continue to be, a significant factor as regards confidence in the whole of the pensions industry. I do not wish to dwell in detail on computer systems and the administration of benefit but it is a key factor that we cannot ignore.
	In 1997 pensioners believed that things could only get better. Yet despite that, the average value of GDP spent on pensioners fell from 6.22 per cent in 1996-97 to 6.0 per cent in 2001-02. Since 1997 the number of pensioners missing out on benefits has increased. The latest take-up figures show that up to 700,000 pensioners are not receiving MIG to which they are entitled. Some £750 million worth of benefit is unclaimed by pensioners. Despite that the Government continue to favour an approach which is increasingly dependent on means testing. When the pension credit is fully implemented, between 50 and 70 per cent of all pensioners will be subject to means testing. The Select Committee questioned whether in that circumstance the state second pension will have a viable future.
	As the noble Baroness, Lady Turner, noted, stakeholder pensions—the Government's fall-back position—have been taken up only slowly. The reasons for the slow take-up are not yet clear but concerns that such policies may, by the time they mature, have little value to the individual coupled with reluctance of advisers still reeling from accusations of misselling to recommend them must be contributory factors. But what is more worrying is the failure of the individual pension accounts scheme. That was enthusiastically promoted as a means to transform pension provision and boost private pension savings, but only one company offered the product. Since they were launched alongside stakeholder pensions, hardly any have been sold. Overall, current government policy on state provision is starting to look a little piecemeal, short term and administratively over complex.
	I do not wish to spend a great deal of time talking about the change from defined benefit to defined contribution schemes. Many noble Lords have done that already in the debate. However, I simply wish to say to those companies which are rushing to follow suit that they would do well to look to the USA where similar moves have damaged employee relationships and companies which are suffering skill shortages have experienced the transfer of those skills away from their companies to those in which salaries are paid at a higher level to offset the lack of pension income. I also wonder to what extent we shall begin in future in this country to see increased redundancy levels among older employees with a knock-on effect to the public purse in unemployment benefits. Companies with skill shortages should think again about that matter.
	One solution to the problem of increasing dependency ratios which many speakers have mentioned is an increase in the state retirement age. I remind noble Lords who may have seen the relevant article that Professor Alan Walker made the forceful point in Monday's edition of the Guardian that increasing the state retirement age in itself is not an answer; it has to be accompanied by anti-age discrimination legislation in employment or unemployment benefits currently paid to people aged 50 to 60 get shifted up a generation. Do the Government realise that there is a case for implementing the EU directive on age discrimination in employment before the deadline of 2006?
	If the overall outlook on pensions is alarming, and according to the National Association of Pension Funds it is, there is one group of people who should be doubly alarmed; that is, women and the noble Lord, Lord Fowler. Evidence from the SAGE Unit at the LSE shows that inequalities in the pension system built in at the time of Beveridge remain and are compounded. The Beveridge report was founded on the assumption that a woman would qualify for her pension via her husband's contributions. Research published last week by my honourable friend in another place, Mr Steve Webb, shows graphically the damaging effect of that assumption on women today.
	Before 1977, women could opt to pay a reduced rate of NI. Many did so without being aware that they would be foregoing their future pension rights, and are only now learning that they have a pension entitlement of just a few pence. Some were advised that they would receive 60 per cent of their husband's pension, but until their husband reaches 65, some receive nothing. In 1989, changes in the law reduced the NI bill for low earners. It was then advisable for some to opt back into the full rate scheme. Many appear not to have been advised and have ended up paying more national insurance contributions on the reduced rate than their colleagues who pay the full rate for a full state pension. All now face retirement on a very low income—some to a dramatic extent.
	Women are the most prevalent among the lower paid. In a lifetime, they can expect to earn more than £250,000 less than their male counterparts. They are likely to have an occupational pension. The state second pension assumes a working contribution of 49 years, which very few women have. Stakeholder pensions are supposed to bring flexibility but stakeholder pensions depend on fund performance.
	One of the key areas, as many noble Lords have said, is the urgent need to reform annuities. Dr Oonagh McDonald of the Retirement Income Reform Campaign makes the important point that while defined benefit schemes do not discriminate on the basis of gender, defined contribution schemes do. Defined contribution schemes compel members to purchase annuities, which discriminate on the grounds of gender more than any other factor. Despite the fact that life expectancy of men and women is growing closer—the gap is now less than four years—most schemes still make payments to women that are 20 per cent lower than those to men.
	Life patterns are changing and there is now a growing case for a thorough overhaul of pensions policy on the ground of gender. Otherwise, as the noble Lord, Lord Fowler, said, women will face a great deal of poverty in future.
	In the short time remaining, I wish to commend to the Government two courses of action. First, in order to bring stability and transparency to state provision, the Government should cease their current policy of increased and complex targeting. Everybody needs to be able to calculate what their basic state benefit will be, even though that will be inadequate and they will have to make their own private provision on top of that. Secondly, in partnership with the private sector, a concerted effort to increase education about pensions and retirement income should be initiated as soon as possible. As a spokesperson for the Co-op Insurance Society said in March 2002:
	"Consumers need to be clear about what to expect from government, and with the right incentives to save they can then successfully make their own private provision for retirement. Only when a state solution is achieved and understood will individuals appreciate the risk of not having saved is greater than that of having saved".

Lord Higgins: My Lords, I join noble Lords in congratulating my noble friend Lord Fowler on initiating this debate. He made a distinguished, powerful and alarming speech, which I hope will receive widespread attention. He also paid tribute, as have many noble Lords, to Lady Castle. I share the sadness at her absence and the fact that she is not able to advance her views. Those views were, I stress, supported by the Select Committee in another place. We found ourselves agreeing more and more. I was not particularly worried about agreeing with her but I believe that she may have been somewhat worried about agreeing with me. Her loss is a sadness; we respect her memory.
	I declare an interest as the chairman of trustees of an occupational pension scheme. I disagree with the noble Lord, Lord Varley. I believe that there is a crisis in pensions provision and that that crisis is now. The danger is that the effect will be felt for a very long time. My noble friend rightly drew attention to that crisis.
	At the risk of some repetition, it is worth stressing the cumulative effects of the various factors now affecting pensions provision. It is of course affected by the fact that people are living longer—the age of the population is increasing. We warned about the long-term effect of the Chancellor's action on ACT from the very beginning. The noble Lord, Lord Oakeshott, stressed why that is becoming apparent.
	Pensions provision has also been affected by the fall in the stock market, the fall in the savings ratio—it is barely half what it was in 1997—low annuity rates (which reflect the Government's policy on gilts) and the Government's persistence on the 75-year rule, despite the fact that the House has twice voted against it. It is also affected by the Government's policy on uprating the national insurance pension, as against the minimum income guarantee, the contracting-out rebate, which is tending to push people out of private schemes and back into the state scheme, the change—this point has not been mentioned—of many pension schemes to a market-related basis and, of course, the effect of FRS 17.
	All of those factors are having a cumulative effect. Some of them are short term and perhaps temporary, but others are long term. Some can be affected by government but others are beyond government control. It is essential for the Government to do all they can to improve the situation.
	My noble friend Lord Fowler discussed company schemes and the noble Baroness, Lady Turner of Camden, rightly stressed their importance in the system. The major shift from final salary to defined contribution schemes is a matter of grave concern. There seems to have been something approaching panic among some companies. As the noble Baroness, Lady Barker, said, they should take account of the reasons why they are producing pension schemes in the first place. There is also the danger of a knee-jerk reaction and the fact that it is becoming fashionable to change from one scheme to the other. A major transfer of risk is involved. The extent to which that is from the company to the individual and the extent to which that is important depends on the size of the pension fund compared with the size of the company. In some cases, the pension fund may be a great deal bigger. As a result, the fluctuations in the company's financial position—that is a result of FRS 17—may be sufficiently large to prevent it paying dividends and so on, which is of great importance. The number of company schemes closing down has nearly doubled in the past year.
	I want to say a word on FRS 17. In a short time we shall move towards a European standard. It is absurd to go for FRS 17 at this stage if one is going to have a system under the European standard that allows a degree of smoothing. Accountancy bodies are right to argue for a degree of transparency but I hope that the move to the European scheme may alleviate the tendency for companies to change from final salary to defined contribution schemes.
	The Government have a responsibility, which the accountancy standards body does not, of taking account of the wider issues. Concerns have been clearly expressed. Fluctuations in a company's balance sheet as a result of market pressures are important.
	On the funding issue, it is important that as many schemes as possible should be funded. There are increasing doubts in both political parties about the "pay as you go" scheme. That was implicit in the remarks of the noble Lord, Lord Desai, who said that there is no guarantee that future generations will pay up in relation to such a scheme. Indeed, as the number of people who rely on the minimum income guarantee increases—perhaps the noble Baroness can give us an idea of how many people she believes will be receiving the minimum income guarantee by, let us say, 2020 or even 2050—then of course the question arises of who will pay. That is not at all clear. A large percentage of the population will be on the minimum income guarantee and I suspect that relatively few will receive higher pensions for which they have made provision themselves.
	Alas, I do not have time to go into detail about the state pension arrangements, except to say that there is now considerable confusion so far as concerns the national insurance contribution system. We are about to deal with the National Insurance Contributions Bill. I believe that the fact that the money from national insurance contributions provides both for the NHS and for pensions through the National Insurance Fund leads to a great deal of confusion. It is high time that we segregated out those two so that we know exactly how much money is going in one direction—that is, to the NHS—and how much to the National Insurance Fund.
	So far as concerns the stakeholder pension, to which a number of noble Lords have referred, I suspect that to a large extent it has missed its target. The take-up has not been as great as any of us would have hoped. So far as concerns the state second pension, there have been several criticisms of it, most notably by Mr Timmins in the Financial Times. We still do not know when it will change from a graded basis to a flat-rate basis. Fundamentally, all that suggests that the Government's objective of reversing the ratio of 40 per cent of pensions being provided by the private sector and 60 per cent by the Government is increasingly in doubt.
	I want to make one or two more brief points. I believe that the Government are proposing to tell people what their pensions are likely to be. My noble friend Lord Freeman and, I believe, the noble Lord, Lord Varley, suggested that that was a good thing. I do not believe that a satisfactory forecast of that kind is likely to be accurate. Certainly, if the attempt had been made 10 years ago, it would by now have been proved to be very inaccurate.
	It would be more helpful if the Government were to tell us what size of pension fund will be necessary to give people an income above the minimum income guarantee level. Whether it be at the lower levels of company schemes on defined contributions, on stakeholder schemes or whatever, there is a real danger that people will contribute a considerable amount of money throughout their lifetime but find, when they come to retire, that that will all be taken away because those contributions will be taken into account in calculating the minimum income guarantee. I believe that we need to know what size of pension fund is necessary in order to provide people with a sum above that level. That would be more helpful than a very speculative estimate as to what individuals' pensions might be.
	I want to make one final point. The Government continue to avoid saying what the pensions liabilities of the national insurance scheme are so far as concerns their balance sheet. We had a Bill which was supposed to produce a government balance sheet. The liabilities of the pension commitments of the Government have not been reflected in that. It is an important point.
	As I said, this has been alarming debate, but I believe that it has provided a warning signal that needs to be heeded. Action needs to be taken in many areas in order to prevent this crisis developing further and adversely affecting the standard of living of generations to come.

Baroness Hollis of Heigham: My Lords, I am grateful to the noble Lord, Lord Fowler, for initiating an extraordinarily well informed and very interesting debate. Like others, I deeply miss Lady Castle. But I know that my noble friend Lady Turner will continue to fly the standard for her.
	I am very pleased to have the opportunity to discuss pensions today. The noble Lord, Lord Fowler, started by saying in, I believe, almost Disraelian language that he was worried about the development of two nations. I agree. And my noble friend Lord Desai said that we were perhaps the last of the lucky generation. That is true, but I want to correct him. Some of us have had access to good occupational schemes—indeed, we have been members of a lucky generation—but, for decades, women, unskilled men, those living in areas of chronic unemployment and those suffering chronic ill-health have never been lucky.
	Hence our strategy to tackle the growing inequality between rich and poorer pensioners. On average, older people who have already retired are much better off than was the case 20 years ago. However, when we came to government the picture was mixed and we have taken action to help those in need. We have introduced the minimum income guarantee, and we have provided support through the Pension Service, as well as making increases in the basic state pension. We have given extra support to pensioners with a real-terms rise of approximately £6 billion since 1997, of which £2.5 billion has been spent on the poorest third.
	The result can be seen in the latest April HBAI statistics. Those show that using 1996-97 as our baseline, 27 per cent of pensioners were below 60 per cent median AHC figures when we came into government. That is now 15 per cent. The figure has reduced from 27 to 15 per cent using those 1996-97 baseline figures—that is, it has virtually halved. Therefore, we are beginning to narrow the gap in absolute terms between rich and poor. As I said, we can see that the incomes of our poorest pensioners have grown twice as fast as average earnings in real terms. Therefore, relatively their position is improving dramatically.
	The noble Lords, Lord Freeman and Lord Oakeshott, and others called tonight for a rise in the retirement age to 70. There is not a retirement age of 70; there is an age at which the state pension is paid, and that is 65. Here I agree with the noble Baroness, Lady Barker, that the problem is not that the retirement age is 65 and that it should be 70; the problem is that the state retirement pension is paid at 65 and too many people drop out of the labour market at 55, 58 or 60. They live off their savings and therefore port poverty into their old age. Anyone of the age of 65 can defer taking the state retirement pension and receive an increment worth about 7.5 per cent a year. Thus, effectively they can have a flexible decade of retirement. However, as your Lordships know, we shall be considering such issues over the next few years.
	The first part of our strategy was to try to narrow the gap between poorer and richer pensioners. The second stage is to address the disincentive for people to save. I am delighted that the noble Baroness, Lady Greengross, was able to pay tribute to the work of pension credit. To talk about pension credit, as some press reports have done, as penalising thrift is simply absurd. At present, for example, anyone who has a private pension income at a level between the retirement pension and MIG receives a deduction pound for pound—that is, it is a 100 per cent deduction. In future, under pension credit there will instead be a taper of 40 per cent. That is, indeed, a help to those on modest savings and modest occupational pensions.
	Pension credit will signal the end of the weekly means test. The noble Baroness, Lady Greengross, was right to say that we should be talking the language of entitlement and not means-testing. Instead of a weekly means test, there will be something like a quinquennial review of income. Supported by the new Pension Service, I hope that take-up figures, which everyone wants to see achieving the level that is appropriate, will include the pensioners who need the money most. We are making significant moves in that direction. I believe that what we are doing through the Pension Service and pension credit will see us get there.
	I now want to talk a little about our strategy to ensure that future pensioners have a decent income in retirement. That brings us to the point that most people dwelt on tonight—that is, the need for a good second pension. The key point to emphasise—it has not been mentioned tonight—is that a decent occupational pension reflects not what one does when one is in one's 50s, let alone what one does in one's 60s; it reflects the fact that one has gone into work and obtained an adequate job with an adequate pension scheme in one's 20s. It is compound interest that pays.
	Our responsibility is also to ensure that we do not penalise individuals so that those who were poor before they retire continue in poverty once they reach retirement age, particularly women and carers. For those two reasons we want to ensure long-term pension commitment for those in the labour market and financial support through a pension for those who are able to enter the labour market only intermittently because of care responsibilities or disability. For that reason we introduced the state second pension, which will make it worth while for people on low and moderate earnings to save for their retirement.
	We also want to ensure that people have a decently funded scheme, which is where employers have a vital role to play. The noble Lord, Lord Freeman, wanted to know what kind of information would be made available. He asked about reviews. He is absolutely right that unless people know the sums and the prospects they will not save.
	The Pickering and the Sanders reports will be published this summer. The response to the Myners report has already been published, but we are consulting on some of the specific recommendations on trustees and the like. We expect—probably in the autumn—to have an across-the-board government response, but with health warnings attached.
	What Myners said relates back to what the noble Lord, Lord Higgins, said. He showed in his review that what really matters in terms of pension funds is their record of asset management. It followed from that that ACT, whose loss has been much regretted and deplored by the noble Lord, Lord Higgins, is probably less than one-tenth of the difference between the best and the worst performing providers of pensions.
	As people are concerned that they should have a decently funded second pension, we have introduced not just the state second pension, which is not funded, but the stakeholder pension as well. The latest figures show that something like 815,000 pensions have been sold up to the end of March. That is not the disappointing result suggested by the noble Baroness, Lady Barker, and my noble friend Lady Turner. Something like three-quarters of a million more people are now saving for retirement than a year ago. We have to achieve the correct balance, as we believe we are, which is why there is a review.
	There has been much talk of a pensions crisis. My noble friend Lord Varley batted those words around. Defined benefits pension schemes are still the most widespread form of provision. In 2000 in the private sector, 53 per cent of employees in companies with 20 or more staff had access to a defined benefit scheme. A quarter of all employees in companies with 20 or more staff were active members, and 45 per cent had some kind of employer-sponsored provision.
	There is a significant problem, but I do not believe that it is a crisis. In my view the problem is not so much the switch from defined benefit to defined contribution schemes. There are differences, such as the rate of portability with defined contribution schemes, and there is less security with defined contribution schemes. We know that those may or may not be regarded as offsetting each other. I believe that the noble Lord, Lord Higgins, was right to say that the real problem is that this opportunity has been taken by finance directors to cut employers' contributions. That is the basic problem.
	All the statistical forecasting that I have seen shows that if one can ensure that the employer-employee contributions together remain at the same figure as under a defined benefit scheme, over time the outcome between a defined benefit and a defined contribution scheme should be little different. Precisely because that does not happen, and as the NACF has shown the average employers' contribution has halved from about 12 or 15 per cent to 6 per cent, the crisis to which the noble Lord, Lord Higgins, referred, may occur. That is because employers are seeking to use this as an opportunity to cut their contributions.

Lord Higgins: My Lords, does the noble Baroness not at least accept that there is a transfer of risk from the employer?

Baroness Hollis of Heigham: Yes, my Lords, I said that on the one hand there is a transfer of risk and on the other hand there is also a transfer of cash, which is made possible more easily by the portability of DC schemes. I tried to suggest that the one offset the other, but that is a matter of judgment.
	The trend away from DB schemes has been in evidence for 40 years—not for four years. It is due to a combination of long-term increases in longevity. Over the next 20 years the numbers of people over the age of 85 will double, although some of the more alarming statistics about our average life expectancy should be taken with health warnings. The big difference that has taken place over the past 200 years is not that people are living longer—once people reach the age of 20 they live much the same length of time—but there has been a reduction in infant mortality, and averaging conceals that fact.
	There has been a combination of long-term increases in longevity and medium-term losses on the stock market, which, as my noble friend Lord Varley emphasised, may have wiped something like £450 billion off pension assets on some calculations, as well as short term issues with FRS17. I agree with some of the comments made by the noble Lord, Lord Higgins, on FRS17. I share his views and my right honourable friend in the other place shares his views, that an equalising of accountancy standards over, say, three years on the European standard, rather than that imposed by the accounting standards board, will be a more appropriate way forward.
	The level of contribution is important. One of the reasons that employers under DC schemes are reducing contributions is because they are matching the contributions made by employees. The trouble is that many schemes are being set up for new employees who tend to be younger and, therefore, contribute less. We shall need to encourage employers to have foresight in relation to this matter, which not all young people entering the labour market can be expected to have.
	I want to take issue with the fact that there is a savings crisis as opposed to a pensions crisis. I have looked at the chart lines on that, comparing the level of savings with the level of inflation over the past 15 or 20 years. It is clear that the level of savings tends to reflect the level of inflation. It is insecurity that begets saving. Instead, with low inflation and low cash returns, considerable savings have been transferred and diverted into house purchase. However, low inflation itself is vital. It is true that annuity rates have fallen, which in turn reflect low inflation. Much as pensioners would like, they cannot have high annuity returns and low inflation rates.
	In this context, noble Lords have advanced the case of the David Curry Bill that the world will be a much better place, and there will be positive incentives to save if only people could ensure that they could pass on their annuity pot to their children in the future. It may have been the noble Lord, Lord Fowler, who said that my right honourable friend Mr McCartney in another place said that this was a rich man's privilege. I believe he should respect that information. As far as I can ascertain, to ensure that people have a pension pot that floats them off state benefits, which is the minimum that every one would require, would require an annuity pot of at least £200,000 or even £250,000.
	If on top of that one strips out the tax privileges that ensured that there was protection against poverty in old age—there is no point in having a double provision of tax privileges for inheritance purposes—one takes a further 30 per cent out of the pot. When one adds those two things together, one is saying that if those two points were built into the David Curry Bill they would benefit only the tiniest minority of pensioners and certainly not those pensioners facing any possible risk to comfort in their old age.
	What really matters is the combination of return and inflation. I asked for work to be undertaken to find out what would happen if one had an annuity of £20,000 a year and how long it would take to be halved. At 2.5 per cent inflation it would take 29 years for that annuity return to be halved; at 5 per cent inflation it would take 14 years to be halved; and at 10 per cent inflation it would take eight years to be halved. Low inflation matters at least as much as high returns because that will protect people, particularly women, against poverty in their old age.
	As many noble Lords have said, we have to be honest about the situation. It is not realistic to expect people to join the labour market in their early 20s, work for 30 or 40 years and out of that find themselves with a pension for a further 40 years unless employees and employers make adequate provision. However, one encouraging factor is often overlooked. The difference for pensioners between a minimum income and a comfortable retirement is often whether they have a second pension. What may increasingly transform their pension finances is whether the spouse has an occupational pension as well.
	I return to a point I made earlier. The more we encourage married women into work—over 70 per cent of them now do—the more they benefit from the Government's combination of our minimum wage policy, our change to the lower earnings limit, our favourable treatment of second earners under the new tax credit scheme, our development of the state second pension and our stakeholder proposals. When we put all of that together it is more likely that women, as spouses, as partners, will bring into the retirement family income a second occupational pension which may admittedly be modest, but which may make all the difference between getting by and having comfort in old age. I accept that his 40 years and in this case her 20 do not add up to 60; we do not get the effect of compounding. Nonetheless, it will be a significant contribution.
	I conclude. The Government believe that they are doing their bit. We have provided stable economic conditions in which people can find, attain and hold down jobs. Youth unemployment has virtually disappeared in this country. We have reduced inflation, which is now lower in this country than anywhere in the OECD, so pensions hold their value. We are producing pension products for those who have not had access, through modest incomes, to unfunded and funded schemes alike, including stakeholders. We are making information available. We are ensuring that the right products are in place to offer choice and flexibility. And we are ensuring that the most appropriate regulatory regime exists. We are drawing on the expertise of Mr Pickering, Mr Sanders, Mr Myners and others, to ensure that that regime is the correct one.
	But now it is up to individuals, with the support of employers, to ensure that they safeguard the future. The key to a secure retirement is to start saving enough early enough and to continue to do so throughout one's working life.

Lord Fowler: My Lords, this has been a short but important debate and I am grateful to all who have taken part. We are all agreed that savings for retirement need to improve. As my noble friend Lord Freeman and others said, we need to improve the climate for saving and we need to encourage pensions for, as both my noble friend Lord Higgins and my neighbour from the Isle of Wight, the noble Lord, Lord Oakeshott, said, we are facing a pensions crisis.
	But I agree entirely with the noble Lord, Lord Varley; it is a crisis that we can tackle. That is clear. Indeed, valuable suggestions have been put forward in the debate on the measures that can be taken at this stage. I regard annuities as being one of the most important.
	The Minister played a straight bat on virtually every proposal that was put forward. But I hope that the Government will not only take note of the warnings that have been given in the debate—I sincerely believe that they are serious warnings—but will also take note of and take time to consider quietly the proposals that have been made during it from all sides of the House. I do not believe that we can allow the position simply to drift on in the present way.
	This has been a valuable debate. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

TSE (England) Regulations 2002

The Countess of Mar: rose to move, That an humble Address be presented to Her Majesty praying that the Regulations, laid before the House on 27th March, be annulled (S.I. 2002/843).

The Countess of Mar: My Lords, it is with a sense of sorrow that I table this prayer to annul the TSE (England) Regulations 2002. They were laid on 27th March 2002 and came into force on 19th April. Before we go any further, I should like to reassure noble Lords who are under the impression that it is unconstitutional for Members of this House to vote on a prayer to annul a statutory instrument that, while it is not done very often, there is no constitutional bar.
	My concerns are serious concerns. We, in this House, as well as in another place, must ensure that the laws we make are compatible with the laws already on the statute book; that they are reasonable and proportional. I am not satisfied that these regulations meet those responsibilities. I am also certain that they are seriously over-prescriptive.
	I declare my interests. My husband and I have a small herd of pedigree Blonde d'Aquitaine cattle, a flock of pedigree Black Welsh Mountain sheep and a herd of dairy goats. I have had an interest in animal health for many years and the Minister knows that the sheep were blood tested only yesterday under the voluntary scrapie scheme.
	I have absolutely no political axe to grind, nor am I seeking vengeance for any act of this Government against the farming community. It is all very well for the Government, the Minister, or officials from DEFRA to say that most of these regulations have already been on the statute book. They may well have been. They may well have slipped past the parliamentary defences as these regulations very nearly did. That does not mean that they make good law. We are now looking at this particular piece of legislation, not what has been. Having almost accidentally discovered what I believe are serious flaws, I believe that we should now get it right.
	I wrote to the Minister last week to outline my concerns. He replied with what I believe is a genuine attempt to reduce those concerns. Instead, unfortunately, he has increased them. He informs me that,
	"The TSE controls have been developed largely to protect the public".
	Despite the millions of pounds that have been poured into research to prove that human variant CJD is caused by eating beef, there is still no conclusive evidence that that is so. There is no shred of evidence that sheep have ever had BSE. Indeed, there is no conclusive evidence that BSE is caused by cattle ingesting meat and bone meal or even that BSE is infectious. But that is not the point of my argument tonight.
	I accept that meat must be put upon the bones of Regulation (EC) No. 999/2001 and its subsequent amendments. As the Minister said in his reply to me,
	"Whilst Community legislation is directly applicable, it does not say how key objectives in relation to public and animal health should be achieved".
	Is it a "key objective" to hold the sword of Damocles over the heads of millions of animal keepers? I am sure it was not the Minister's objective. But he must understand that that is what those regulations do.
	I have scoured Regulation (EC) No. 999/2001 for mention of animals other than bovines, ovines or caprines—cattle, sheep and goats for the uninitiated. The only reference that I can find is in an amending regulation, (EC) 270/2002, Annex 1 Chapter B, headed: "Information to be presented by Member States in their report". Paragraph 9 states:
	"Positive TSE cases confirmed in animals other than bovine, ovine or caprine animals".
	Article 6 of the EC parent regulation orders an annual programme for monitoring BSE and scrapie, the details of which are laid down in the amending Regulation (EC) 270/2002. Each member state is also required to inform the Commission and other member states of the emergence of a TSE other than BSE. Part II of those regulations details the authority and powers of an inspector, ostensibly to carry out the monitoring functions under Article 6.
	Article 6 and the amended Annex 3 make no mention of an inspector,
	"entering any premises (excluding premises only as a dwelling)",
	to carry out the functions listed in paragraph 4(2)(a) to (n) of our regulations.
	First, most farmhouses contain a farm office. So the inspector could, by law, have access to any farmhouse where there is an office because it is not used only as a dwelling. Secondly, there is no definition of a "TSE susceptible animal", despite the Minister's assurance to the Joint Committee that the definition was in the EC regulation. The EC regulation gives a definition of
	"an animal suspected of being infected by a TSE".
	That is not a TSE-susceptible animal and it specifically excludes humans.
	For some inexplicable reason, dogs are excluded from the TSE (England) Regulations 2002, when all other animals, birds and fish are not. Why the distinction, and where is the authority? Are all those creatures, except dogs, TSE-susceptible? I understand that scientists have tried in vain to produce a TSE in pigs. Why are not pigs excluded? How is the alpaca keeper to know whether the inspector is right when he is ordered to lock up his animals? I am sure that all noble Lords will agree that there is a difference between a TSE-susceptible animal and an animal suspected of being infected by a TSE.
	To put it plainly, paragraph 4(2)(k) gives the inspector power to kill any number of healthy animals that he thinks are susceptible to a TSE and, if the owner argues the toss with him or he thinks that the owner may do so, under paragraph 4(4), the inspector can take himself off to a justice of the peace to obtain a warrant to force the owner to comply. There is no provision for appeal. I have put that simply, but that is the essence of this part of the regulation. That is what we all objected to so much in the Animal Health Bill.
	We then come to paragraphs 4(2)(l) and (m). They give an inspector the right to examine and take copies of,
	"any record, in whatever form the record may be held",
	and to,
	"have access to, and check the operation of, any computer and any associated apparatus or material which is or has been used in connection with any record".
	The inspector can require,
	"any person who has charge of or who is otherwise concerned with the operation of the computer, apparatus or material to afford him such assistance as he may reasonably require and, where a record is kept by means of a computer, may require the records to be reproduced in a form in which they may be taken away".
	That is an extraordinarily draconian measure to enforce Chapter 6 of the EC regulation. I remind noble Lords that that chapter refers to monitoring of slaughtered or already dead animals for BSE or scrapie if they are cattle, sheep or goats or of any other dead animal that has died from a suspected TSE.
	Many farmers now keep their personal business records, such as bank account details and addresses on their computers. Whether or not those powers are ever used, I suspect that they infringe the right to a personal and family life under the Human Rights Act 1998 and that the Data Protection Act 1998 will also be infringed. If we are to pass legislation, do we not have a duty to ensure that it will not immediately lead to legal proceedings under superior legislation?
	I have covered only three pages of a 221 page document. I have read all the other pages and have repeatedly felt that the legislation should be in the form of a Bill that can be thoroughly debated. Your Lordships may think that this is just another whinge by a farmer. I wonder whether they realise that, while the regulations' principal targets are farmed animals, there is nothing to stop an inspector from entering a garden where one may keep a carp in a pond, ferrets in a shed, pigeons in a loft or grandchildren may have a rabbit in a hutch. Cats are not safe either, if they are outside a dwelling.
	I note the amendment to my Motion tabled by the noble Lord, Lord Livsey of Tolgarth. I assume that he knows that nothing can be achieved by tabling a Motion to amend a statutory instrument, which is what his amendment will do if it is agreed to. A statutory instrument can only be annulled. If noble Lords agree to his amendment, sadly, I must assume that they are happy for our parliamentary system to be brought into disrepute and for our freedom to be drastically eroded.
	The Minister, in his manuscript amendment to the amendment tabled by the noble Lord, Lord Livsey, is clearly trying to meet one of my concerns, but his amendment will have the same effect as that of the noble Lord, Lord Livsey. The Minister seems not to have grasped my concern about the constitutional and procedural aspects of the statutory instrument.
	Various spurious arguments are being circulated about the effect of a vote in favour of my Motion. Scientists say that it will destroy all that they have built up over the years since BSE erupted in our cattle. The National Farmers Union protests that consumer confidence in British meat would immediately collapse and that our export market would be destroyed. When did we hear that before? Today, the Minister published a statement to the effect that the Government will be left without any powers over BSE and scrapie monitoring, prevention and eradication. He said:
	"People who knock this SI are totally misguided. They run the risk of dismantling long-standing, evidence-based BSE controls of paramount importance for public and animal health".
	In my opinion, that statement is, to say the very least, disingenuous.
	Section 5 of the Statutory Instruments Act 1946 provides for the annulment of statutory instruments by resolution of either House of Parliament. If this House resolves that,
	"an humble Address be presented to Her Majesty praying that these Regulations be annulled, no further proceedings shall be taken thereunder after the date of the resolution".
	I understand that that means that the regulations continue in existence but cannot be enforced and that any earlier, revoked regulations are not revived. I accept that the effect of that would be that no controls would be in force. However, I also understand that the courts could be expected to interpret the 1946 Act in such a way as to lead to a satisfactory state of affairs. They may well hold that the revocation of the earlier instruments was, in effect, suspended. My Lords, from my point of view, the most satisfactory solution would be for the noble Lord the Minister to make new regulations that take into account our reservations as quickly as possible. I beg to move.
	Moved, That an humble Address be presented to Her Majesty praying that the Regulations, laid before the House on 27th March, be annulled (S.I. 2002/843).—(The Countess of Mar.)

Lord Livsey of Talgarth: rose to move, as an amendment to the Countess of Mar's Motion, to leave out from "That" to the end and insert—
	"this House calls upon Her Majesty' Government, in relation to the regulations laid on 27th March (S.I. 2002/843):
	(a) to give an undertaking that the period of time in which a veterinary inspector issuing a notice of intended slaughter shall permit representations to the Secretary of State shall be no less than seven days;
	(b) to consider bringing in further regulations setting up an independent appeals adjudicator nominated by the British Veterinary Association; and
	(c) to keep the regulations under review in the light of scientific and technological developments relating to TSE."

Lord Livsey of Talgarth: My Lords, first, I congratulate the noble Countess, Lady Mar, on the well-informed concern that she displays—she has a record of that in animal health over a long period. I agree with her that governance by statutory instrument is unsatisfactory and governments of all persuasions increasingly use that device where primary legislation should be used. This statutory instrument is of great importance and the fact that it is 221 pages long is evidence of the detail that it contains.
	The debate is balanced between the right of the public to be protected and the right of producers and their animals to receive just treatment. That is a finely balanced argument that must be weighed up in the legislation. There is no doubt that many people—myself included—feel that the provisions in the statutory instrument for livestock breeders and producers tend to be over the top and gold-plated, with stringent provisions for the immediate slaughter of TSE-susceptible animals, entry to holdings and the forced removal of records from premises. In many respects, they replicate the powers of the Animal Health Bill, which was recently defeated in your Lordships' House.
	In particular, there appears to be no provision for farmers and livestock breeders incidentally to appeal against an order by an inspector to slaughter animals. In my view, that infringes the rights of livestock producers and, as this is secondary legislation, there is no statement to proclaim that the instrument complies with the European Convention on Human Rights, which is incorporated in UK legislation.
	Therefore, in my amendment I call for three measures to protect the rights of livestock keepers affected by the statutory instrument. The most important is contained in paragraph (b) of my amendment, which would allow for the nomination by the British Veterinary Association of an independent appeals adjudicator who can fairly assess and judge the issues without prejudice or influence from the Secretary of State. I have discussed the matter with the British Veterinary Association, which believes that such a mechanism could be put in place. Farmers and stock-owners would at least have more confidence that they were being fairly treated in the situation with which they may be confronted.
	Paragraph (a) of my amendment refers to seven working days, to allow sufficient time for proper informed representations to be made. The Minister's manuscript amendment would take away that timescale. Why? Do the Government require more flexibility with regard to time? How will they ensure that representations can be made against a notice of slaughter? The fact that TSE is not infectious, animal to animal, must be relevant. The situation with foot and mouth disease is entirely different, as it is highly infectious animal to animal and requires immediate action. There are clear differences between the two situations.
	If more flexibility is required, have I unearthed a loophole by which the provisions for TSE can be applied to foot and mouth disease? That would bring us back to square one and the slaughter provisions of the Animal Health Bill that were opposed by most Members of the House. The time allowed for representations is a crucial acid test of the Government's integrity and their intentions for the statutory instrument. I require a definitive time limit, unless the Minister can persuade me otherwise. The reasons had better be good.
	Paragraph (c) of my amendment refers to the never-ending march of technology. The scientific study of the diagnosis of BSE in cattle and scrapie in sheep is moving fast. This part of the amendment would allow the Minister to review the regulations in the light of developments.
	A distinction must be drawn between the objectives of Statutory Instrument 2002/843 in controlling the effects of TSE on animal and human health and the means deployed to control the disease through the slaughter of TSE-susceptible animals. Such animals may or may not be carriers of TSE. In the case of scrapie, "susceptible" may mean only that the sheep carries a certain gene. There is an argument about destroying animals with a suspect gene. The concern of many sheep breeders is such that they believe that other desirable characteristics of the gene that may be worth preserving may be lost for ever.
	The only real proof of TSE comes from tests carried out on the brains and specified risk materials of dead animals, hence the slaughter policy in the statutory instrument. The TSE monitoring provision in Part II, paragraph (7) of the statutory instrument which refers to animals on farms gives cause for concern about the powers that the Government require. Those fears were best expressed in a briefing note prepared by the British Veterinary Association. The association said:
	"While the British Veterinary Association is supportive of any measures designed to protect animal and human health, we do seek Government reassurance as to the way in which these Regulations are to be implemented, not least since the SI contains wording seemingly identical to that contained in the Animal Health Bill introduced (and lost) earlier this Session.
	The BVA has noted that in the definition of livestock, equines now appear. These are not subject currently known TSE and this could be seen as setting a precedent insofar as future legislation is concerned.
	The BVA is also concerned to note that the new Statutory Instrument includes powers to slaughter 'any TSE-susceptible animal', while, to our knowledge, the EU regulations mention only suspected and infected cases.
	The BVA can but ask whether the SI as drafted is in the spirit of the EU legislation or has it been added to—the wording concerning powers, penalties, etc. is all too reminiscent of the wording contained in the Animal Health Bill—and whether other member states will be introducing similar legislation".
	That is a reasonable question to put to the Minister.
	The most important points include the fact that there is no independent appeal allowed by the statutory instrument. My amendment would redress that inequality. Secondly, the seizure of livestock or the property of livestock breeders and keepers would have an impact on the farmers' human rights. That is an unsatisfactory state of affairs and there should be adequate redress in the form of an independent appeal. Thirdly, possibly forcing the owner and his staff to participate in the slaughter of their own animals is a highly undesirable state of affairs. Anyone who has kept animals will know that most stockmen could not indulge in such a thing.
	There is no clear statement in the statutory instrument that it cannot be extended to cover foot and mouth disease. The Minister must give us a clear statement to that effect. After all, the Animal Health Bill, which allowed for some rather over-zealous methods of disposing of livestock, was defeated. There is no clear specification of the genotype of TSE that might help identify susceptible animals, although that might be found in future legislation relating to scrapie. We cannot see what is meant by "a susceptible animal". That must be spelt out.
	The noble Countess, Lady Mar, mentioned her fears about Part II, paragraph (7), sub-paragraphs (1), (2) and (3) of the statutory instrument. Those provisions are of concern to me, too. Provided that the Government accept the kind of redress suggested in my amendment, we can overcome some, if not all, of the fears that have been expressed tonight. At least, it would create a better balance between the rights of the public to receive clean, safe food and the rights of the producers to protect their living, their animals and their way of life. I beg to move.

Lord Whitty: rose to move, as a manuscript amendment to Lord Livsey of Talgarth's amendment, to leave out paragraph (a) and insert––
	"(a) to give an undertaking that they will consider ways of ensuring that representations can be made against a notice of intended slaughter issued by a veterinary inspector;".

Lord Whitty: My Lords, I need to explain the use of the slightly unusual procedure in tabling a manuscript amendment in what is already an unusual procedure for this House. The substantive reason for tabling the amendment is that I recognise that in the original amendment moved by the noble Lord, Lord Livsey, there are some real concerns about the regulations. Some of them were echoed in the contribution of the noble Countess, although in what she said and in what has been stated outside the Chamber there have been bizarre and wild allegations as to what the regulations are trying to do.
	I recognise that the noble Lord, Lord Livsey, seeks to address the concerns in a constructive way which the Government can understand. However, paragraph (a) of his amendment could be both damaging to the disease control and to the industry, and it does not recognise the process as it exists. I therefore believe that our formulation is better. I shall deal with that in detail in a moment.
	Before doing so, it is probably appropriate in moving the amendment to indicate the Government's general approach to the prayer to annul. I therefore need to address some of the allegations and assertions made by the noble Countess and the noble Lord and explain what the regulations would do and what would be the effect of not passing them.
	First, the regulations are about TSEs and not about anything else. In response to the noble Lord, Lord Livsey, it is not about foot and mouth. Nor is it about any other disease. It is about TSEs and everything in it relates to the EU directive relating to TSEs. The regulations are about consolidation of previous UK controls and consistency with the new EU measures. Those measure substantially mirror our own and were adopted because, for obvious and tragic reasons, the UK was well ahead of the rest of Europe in establishing a regime of BSE and TSE controls. We are therefore proposing consolidation and consistency, not in any sense radical change.
	In virtually every area, the regulations simply continue the robust package of enforcement powers which already exist. The powers are needed to back up key controls already in place to protect human and animal health from vCJD and BSE.
	While the regulations reflect the increased testing programme for TSEs that is required by the EU regulation, there are no new slaughtering requirements in the regulations. Therefore, the references by the noble Lord, Lord Livsey, to the TSE requirements to implement the national scrapie plan are not relevant here. There are no further slaughter powers in the regulations.
	Our surveillance, to which most of the regulations relate, is to use and test animals which are already dead or on the point of being slaughtered, or if they are casualties or fallen stock. That very much follows the line of surveillance and monitoring we were already pursuing and the line required by the EU. In terms of consistency, Part IV, of which the noble Countess read out significant sections, in no way materially differs from what is in the existing regulations. Let us therefore be clear that the regulations are about consolidating an existing position.
	However, for reasons put by the noble Countess, it is important that the choice before the House today is either to support the regulations or to have no regulations in place. That would destroy a framework which we have established here and which has been very effective in reducing the incidence of BSE and which has been adopted by the EU for its approach to BSE controls across the Union as a whole. If these regulations fall, we will be in a very serious situation indeed. Previous legislation will no longer be in place; there will be no controls; people will be exposed to health risks from meat potentially contaminated with SRM; animals will not be protected from infected feed; and BSE could escalate.
	I am sure that that is not the intention of the noble Countess or of those who support her, but it would at least for a period be the situation. That is why those bodies which are concerned about the regulations have expressed their alarm at the possible implications if your Lordships were to agree to the prayer and annul the regulations. The Food Standards Agency, for example, this morning stressed that the controls against BSE are vital and if the prayer were successful not only would the new controls cease to be applicable but it would be impossible to reinstate many of the measures previously in place.
	Such a scenario would leave a serious gap in our control framework. It would, for example, immediately throw into jeopardy the right of the Meat Hygiene Service to prosecute for failure to remove specified risk material from animals at slaughter houses. That would represent a significant risk to public health. SRM controls are estimated as removing 95 per cent of infectivity.
	Likewise, the National Farmers Union has made its position clear. Its advice and that of the Government is that voting down the regulations would have the effect of suspending existing BSE controls. If that occurred, even for a short period, says the NFU, it would be very damaging to British agriculture and to the public interest. Therefore, both those who are regulating and the industry are concerned about the effectiveness of the controls.
	The regulations have two clear objectives. First, they bring together the key controls which exist and, secondly, they reflect the need to transpose EU directives. The other implication of voting down the regulations today would be that we would be in danger of infraction proceedings from the EU at a time when we are trying desperately to re-establish confidence in British livestock and British meat. That would be a bizarre outcome as the EU has adopted effectively the British approach to the controls. The Community provision, Regulation 999/2001, which was adopted last summer, provides a secure legal basis for such controls.
	It is also the case that there was consultation on the regulations. Admittedly, it was shorter than is normally the case but it was a wide consultation with feedback both formal and informal from a wide range of organisations and individuals. No objections in principle were made to these regulations. The only significant objection came from some representatives of the abattoirs who were concerned about the costs to them of implementing certain provisions, the direct cost of which is covered by the Government. Therefore there was no opposition.
	I should also point out for those who are still following the assertion made in the Daily Telegraph that this is a way of pushing through the Animal Health Bill by the back door, that of course that consultation took place and those regulations existed well before we reached our decision or, indeed, the Animal Health Bill came before this House. So I think that that particular conspiracy theory can be put on one side.
	We need a comprehensive framework: the Community framework, the consolidation of our own framework and a full range of surveillance, of specified risk material removal from cattle, sheep and goats, so that consumers are not put at risk.
	To some extent the noble Countess let the cat out of the bag in her opening remarks, although she did not then pursue them. From what she said, I do not think that she is convinced that this is in fact a public health risk. There is always an element of doubt in any scientific judgment, but the vast majority of scientists, medical experts and vets have reached the conclusion that BSE is transferable to humans and is the cause of variant CJD. In those circumstances, it would be utterly irresponsible of the Government and utterly irresponsible of this House to force the Government to drop the measures they have put in place to protect public health. Essentially, this is a public health regulation. It is not primarily an animal health or agricultural regulation; it stems from anxieties surrounding public health. The House needs to recognise that.
	I turn now to the allegations of gold-plating and of going further than we need to in this area, or at least going further than the pre-existing position. None of that stands up. Let me put it into perspective. In the regulations there are very limited provisions which go beyond the controls previously in place in the UK, but only three such changes have been made. Two of the issues reflect new EU requirements in Regulation 999/2001 and one flows from a recommendation from SEAC, the advisory committee.
	The first issue relates to additional EU surveillance requirements, to which I have already referred, for the presence of TSE in sheep and goats and casualty cattle aged from 24 to 30 months. As I have already said, I am sensitive to the concerns of abattoir owners about the costs of this. That is why DEFRA is meeting all the costs. However, we are obliged to put in this additional requirement.
	The second provision relates to the vertebral column of Beef Assurance Scheme cattle aged over 30 months, which can be sold for consumption up to 42 months. That material must now be removed and treated as SRM. Bearing in mind the very low BSE risk, the British Government were not particularly happy with this provision in the EU recommendations, but the Commission insisted that the provision was necessary. It is in the regulations and we need to transpose it. All other member states are required to remove vertebral column material of cattle aged over 12 months. We have a little longer because of the over-30-months scheme and other provisions pertaining in this country.
	The third provision relates to incinerators used to burn SRM. In future the ash must be disposed of by burial at a licensed landfill site. That is the only possible area where allegations of gold-plating could be made in that it is not an EU requirement, but it does meet a specific recommendation made by SEAC. By and large, it reflects existing industry practice.
	Those are the only ways in which these regulations make any kind of meaningful difference to the pre-existing regulations already in force. Therefore the exaggerated reaction to these regulations is in no way understandable. Some of the concerns which have been expressed relating to data protection and human rights are covered in the general provisions. We have to be proportionate. The implementation of the order has to be consistent with the Data Protection Act and it has to comply with the Human Rights Act, as does all legislation passed by this Government. It is not necessary to specify that explicitly in orders of this kind. Indeed, it would be a strange precedent were we so to do.
	I turn now to the point of my amendment to the amendment tabled by the noble Lord, Lord Livsey of Talgarth, and specifically to why I do not consider the specification of seven days to be appropriate. This relates to the one area where there are slaughter provisions on animals which are suspected of being infected with TSE. In the case of BSE, for example, a seven-day delay—which the noble Lord's original amendment would imply—would be unacceptable in most circumstances. It would mean that we would have to wait for seven days to see whether anyone was going to appeal against the order from the veterinary inspector. That would be particularly difficult were the farmer or livestock owner to be intent on moving the animal. Although some of that could be accounted for by the restriction elements contained in the order, if an appeal were still outstanding then it is possible that the animal might be removed to premises which would not be appropriate. Indeed, so far as concerns the farming industry as a whole, it would rather see such an animal slaughtered as rapidly and as humanely as possible. Therefore the notion of a built-in seven day delay while we wait to discover whether anyone will appeal is inappropriate.
	Of course there may be mistakes. After testing, the animal may turn out not to be suffering from BSE or from another TSE disease, in which case the normal 100 per cent compensation is raised to 125 per cent. So there is some protection for the farmer in those circumstances. But the seven-day delay does not seem necessary in order to allow for the kind of representations which the noble Lord and the noble Countess argue should be available under the provisions.
	The current procedure is that if there is an objection to the order to slaughter, the vet will go to the magistrate, the JP, to seek an order. An appeal to the Secretary of State in those circumstances is probably not the appropriate process. We accept that there is an argument for assuring people that there should be some means of making representations. That is why my amendment indicates that we should consider the options of how that process of making representations should be established.
	It probably should not be a national appeal system as implied in paragraph (a) of the noble Lord's amendment. Indeed, paragraph (b), upon which he laid considerable stress, suggests that there should be an independent BVA-appointed adjudicator, which would be much more appropriate at the regional or county level. In the interests of speed and efficiency, we may consider that kind of representation to be appropriate in these circumstances.
	We have no problem with paragraphs (b) and (c) of the noble Lord's amendment, but I would be grateful if the House were to accept my view that the specification in paragraph (a) is not appropriate. If the House were prepared to agree to that, it would be a useful indication to the Government of how we should implement these measures in practice.
	But I repeat, the reaction to these measures is misguided in the sense that it is based on a misapprehension of the amount of change the regulations will achieve. It is also based on a misapprehension in that the human rights dimension, the data protection dimension and the proportionality requirement are already there in every statutory instrument that the House now passes. The prayer to annul should be resisted.

The Earl of Caithness: My Lords, can the Minister tell the House exactly how this will work in practice? If the House rejects the amendment of the noble Lord, Lord Livsey, to the Motion of the noble Countess, Lady Mar, how will the Minister's manuscript amendment come into effect? How will he implement the good will that he has shown in giving this undertaking that is not in the statutory instrument? How will the prayer be enacted in legal terms should the amendment of the noble Lord, Lord Livsey, be carried, which would then prevent us from voting on the Motion of the noble Countess?

Lord Whitty: My Lords, the procedure is as normal. We vote on the amendments first. If the amendments are carried, we then have to vote on the consolidated Motion, which would be the original Motion of the noble Countess, as amended by either the noble Lord's amendment or by my amendment. The sequence is as per normal. We would then be in a situation where, rather than annulling the regulations, we would have a call on the Government to implement the regulations in line with what lies behind the amendment of the noble Lord, Lord Livsey. I beg to move.

The Duke of Montrose: My Lords, I am grateful to the Minister for laying out his case in so much detail. I declare an interest, which is slightly complicated by the fact that, as the noble Countess, Lady Mar, said, we do not yet know exactly what is meant by "susceptible". I have a herd of cattle which I believe is susceptible to BSE. I have a herd of sheep, the breed of which I believe is not susceptible to BSE. I declare them to make the House aware of my position.
	The way the matter is being approached seems to be a rather complicated and bad business. We are left in an awkward position. Certainly I and a number of others have been bombarded with different opinions of what accepting or rejecting the prayer may achieve.
	This statutory instrument appears to contain enormous Henry VIII powers. I suppose one can have the odd Henry VIII power—I am not well up on the procedures of the House—but the many elements contained in this instrument should have been in a Bill.
	I put that to one side. One is left with numerous questions and anomalies. The Government may not be able to answer precisely my first question. How did so many people lose track of the consultation? The Minister said that they received few responses to the consultation.

Lord Whitty: My Lords, I indicated that the consultation was a somewhat shorter period than the norm. Nevertheless, we had a substantial number of formal and informal responses from the key organisations.

The Duke of Montrose: My Lords, I thank the noble Lord for that response. I inquired of the Sheep Veterinary Society, which had its council meeting earlier this week. Apparently only one member had read the measure. That may be the fault of members, but it seems that many of those concerned were not aware of what was going on.
	Perhaps the Minister can clarify this point. Thirteen statutory instruments are being annulled by the order. At least four pre-date the Scottish devolution Act. If those are annulled, is there anything left for Scottish agriculture, which does not have the benefit, or otherwise, of the statutory instrument which is being introduced?
	The noble Lord, Lord Livsey, spoke about susceptibility. As many noble Lords will be aware, there are five recognised variants in the genetic composition of sheep which produce five ascending levels of susceptibility. On 10th April the Spongiform Encephalopathy Advisory Committee considered the issue that if—I repeat, if—BSE were found in sheep only the most resistant animals would be preserved. Everything else would be excluded from the human feeding chain. That recognises that there is a very resistant genetic variant.
	I draw to noble Lords' attention that this resistant genetic variant has never been found in goats. But to my knowledge BSE has never been found in goats. If the extreme position were taken, all goats would be regarded as susceptible, as are all cattle. We shall be interested to hear whether the Minister can give us a yardstick of susceptibility.
	The Minister spoke about paragraph 4 and the fact that the powers he introduces do not extend the law in any way. Item (k) of paragraph 4(2) states that an inspector has the right to slaughter any TSE susceptible animal. Which of our current regulations contains that power? I understand that the amendment tabled by the noble Lord, Lord Livsey, and possibly that tabled by the Minister, were founded on the fact that at present the statutory instrument contains powers in paragraph 82 on the slaughter of TSE susceptible animals and goes into the question of representations of the owners to the Secretary of State. I emphasise that the clause relates to TSE susceptible animals rather than suspect animals, about which the Minister spoke in his recent reply to the noble Lord, Lord Livsey.
	I raise those questions with the Minister on how the instrument stands in relation to our current legislation.

Lord Williamson of Horton: My Lords, we are faced with a 221-page statutory instrument and a prayer to annul it altogether, an amendment to the Motion which would set a minimum time limit for representations against intended slaughter, and an amendment to the amendment which would delete the minimum time limit and substitute a less specific undertaking about representations against intended slaughter.
	My noble friend Lady Mar did well in drawing attention to the difference between an animal which is actually infected and a TSE susceptible animal. However, in the circumstances, I should like to make one comment and then put a specific question to the noble Lord, Lord Whitty, about his manuscript amendment. I know that he spoke to the latter at some length, but I still have a point to make in that respect. I do not enter into any argument about whether these regulations are intended to substitute for animal health legislation which did not go forward in this House or whether the Government have acted rightly in proceeding in this way. I did not vote for the Motion of the noble Lord, Lord Moran, on the previous occasion. I have, therefore, examined the regulations as they stand.
	My general comment is that we still need to be extremely vigilant about BSE, which, of course, is also a fatal disease for human beings, with all the suffering that it caused for about 100 men and women who died, and, indeed, for their families. It also caused very serious losses to the livestock industry. We must continue to ensure that no mammalian meat and bone meal is used in feedings stuffs, as well as continuing to control the specified offals, and to control—and in due course to eradicate—other TSEs, which are dealt with under Part V of these regulations.
	I keep in mind the quotation from the excellent report from the Phillips committee—words that we should always keep in mind—which states that,
	"some members of the feed trade, being given an inch, felt free to take a yard and continued to clear stocks after the . . . ban came into force".
	For all those reasons we need to recognise that these are important issues of human and animal health which are covered by the regulations. I consider this a very serious business.
	I turn now to my specific question to the Minister. The manuscript amendment tabled in the name of the Minister deals with a real point of importance; namely, the extent to which a person can have time, and the opportunity, to make representations against an intended animal slaughter notice. My question is directed towards discovering the rather narrow point of how useful the Minister's amendment may be on this issue.
	I raise that point because where the inspector has a right under the current regulations to slaughter any TSE susceptible animal (Regulations 4 and 79), there is already provision under Regulations 7 and 82 for a notice—at least outside a slaughter house—to specify a period within which an owner or person in charge of an animal can make representations to the Secretary of State. Leaving aside the big issues that arise, the question is: what is the value of the additional undertaking now tabled by the noble Lord, Lord Whitty? How far does it go, if at all, beyond what is in the regulations as they stand?

The Earl of Northesk: My Lords, I hesitate to intervene in this debate. None the less, I hope that the Minister—and, indeed, the House—will forgive me for taking this opportunity to put on the record two matters that I had occasion to discuss with the noble Lord yesterday, albeit all too briefly.
	First, like the noble Countess, Lady Mar, and notwithstanding the soothing rhetoric of the Minister, I am particularly concerned about the powers granted to inspectors to gain access to computers. Of course, there is legitimacy in granting access in order that relevant records can be inspected; indeed, I do not argue with that. But that is as far as it should go. As I read sub-paragraph (m) of Regulation 4, it implies that inspectors will be empowered to access all records from the computer concerned, possibly to include financial data, perhaps even private correspondence.
	In addition, what useful purpose can be served by inspectors inquiring into TSE susceptibility being empowered to,
	"check the operation of, any computer"?
	I just fail to understand what benefit will accrue from permitting the inspection regime to have access to the way in which the computer under investigation works. How will that facilitate access to relevant records? Bluntly, the powers granted under Regulation 4(2)(m) are disproportionate. I agree with the noble Countess, Lady Mar, that, as such, they are almost certainly against the spirit, if not the letter, of the Data Protection Act.
	I should be grateful if the Minister could further allay my fears on the following points. He may—indeed, up to a point he has already done so—seek to suggest that the power is constrained by reference to Regulation 4(1). But I am bound to say that I am far from certain that such an argument carries sufficient weight. The drafting states that,
	"an inspector may make such enquiries and carry out such investigations"—
	these are the key words—
	"as he considers necessary for any purpose connected with",
	etc. It seems to me that this could give an inspector an entirely free hand, notwithstanding the intended qualification in the text.
	My second point—which I suspect the Minister might be tempted to categorise as one of "the wild allegations"—relates to Technical Standards and Regulations Directive 98/34, as amended by 98/48. Indeed, the noble Lord, Lord Livsey, touched on the European dimension in proposing his amendment. The Minister will be aware that this procedure has already caused the Government some difficulties in this Session in the context of the Tobacco Advertising and Promotion Bill. Be that as it may, my interpretation is that the regulations before the House should be subject to the notification procedure. The reason is quite simple. The interpretation regulation, Regulation 3, defines "livestock" as,
	"any creature, including a fish, kept, fattened or bred for the production of food, wool, skin or fur".
	In other words, the regulations are concerned with, for want of a better phrase, "agricultural product". This, together with "industrial product", is the litmus test of whether a particular piece of legislation requires notification under the directive. Indeed, I can confirm that my consultation with the Commission this morning endorses this analysis.
	The importance of this should not be underestimated. If the regulations are enacted in breach of the directive, it then becomes possible for them to be struck down in their entirety on simple application to the European Court of Justice. In terms, therefore, the Government have to ask themselves whether they want to enact regulations which are potentially procedurally defective and which, on that basis, could be rendered null and void.
	I therefore ask the Minister whether his department has had consultations with the Department of Trade and Industry, the lead department for the Technical Standards and Regulations Directive, as to the status of the regulations in respect of notification. If not, will he undertake to conduct such consultations as a matter of urgency? I look forward to receiving the noble Lord's responses in due course.

Lord Moran: My Lords, first, I think that the House will want to express its gratitude to my noble friend Lady Mar for drawing attention to this very important statutory instrument. Initially, I had some fears that the Government might be introducing by the back door the measures which the House decided on 26th March it did not want to see under the Animal Health Bill. But the Minister has made it clear that the statutory instrument does not affect foot and mouth. I am glad that he has confirmed that.
	I am reluctant to be critical of the Government. This morning my wife, who, as I have said on previous occasions, has a small herd of Welsh Black cattle, received a letter from the National Assembly for Wales about the extensification payment scheme and what is called the definitive agri-monetary compensation second tranche (DAC2) which contained the good news that she would shortly be receiving a payment from the ministry of £4.96.
	As I understand it—the Minister will correct me if I am wrong—these regulations are made under Section 2(2) of the European Communities Act 1972. Therefore, the powers given to the Secretary of State are limited to those necessary to transpose EU legislation, for which he is properly designated, and not to do other things for national policy reasons.
	I was therefore interested in what the noble Lord, Lord Livsey, and others have said about gold-plating of the regulations, particularly with regard to the use of the word "susceptible", which is not in the EU regulations. I wonder whether that is in order. I do not know whether the Joint Committee on Statutory Instruments has considered the regulations, but if so, I wonder whether the committee is satisfied that they are fully within the implementing powers conferred on the Secretary of State by Section 2(2) of the European Communities Act 1972.
	As others have said, regulations of such size and scope should be more fully debated and explained, perhaps by the use of the affirmative procedure. The Delegated Powers and Regulatory Reform Committee might have a view on that.
	I very much agree with the noble Lord, Lord Livsey, that the powers to be given to inspectors are over the top. They appear to be given the power to enter premises to enforce these measures and, where necessary, to impose movement notices or to ensure the slaughter of animals. Some of the powers, such as Regulation 97, are expressed so as to exclude premises used only as a dwelling. Others, such as Regulations 4, 28 and 71, do not appear to be so limited, which implies that inspectors could demand entry even to private homes, accompanied by whomever else they deem necessary, and in some cases by a representative of the EU. We ought to have a better opportunity to debate such questions fully in this House.
	There is a case for more stringent regulations for TSEs than for foot and mouth because BSE, for example, is transmissible to humans and foot and mouth is not.

The Countess of Mar: My Lords, I am sorry to interrupt the noble Lord, but there is still no scientific evidence to prove that BSE is transmissible to humans.

Lord Moran: My Lords, I accept what my noble friend says, but the possibility clearly exists.

The Countess of Mar: My Lords, pigs might fly.

Lord Moran: My Lords, that said, I should be grateful if the Minister would let me know whether I am right in thinking that the powers conferred on him enable him only to transpose EU legislation strictly into our domestic legislation and that they cannot be extended to cover things that we may think it desirable to cover in our national policy.

Baroness Howarth of Breckland: My Lords, I do not have a prepared speech because I came down from Leeds after a series of visits to abattoirs with the Meat Hygiene Advisory Committee to find this Prayer before the House. I declare my interest as a member of the Food Standards Agency.
	I have no other interest except the protection of consumers, but I have been exposed for two years to the science of BSE. In another capacity I am the vice-chair of a large disability charity, so I know about variant CJD at first hand.
	The facts show that this country is at last driving down BSE. That is because of the measures that we have in place. Despite that, we should remind ourselves that we still have more BSE than anywhere else in Europe. If we flinch for a moment in our measures, we shall undo all our good work to protect consumers and our superb farming industry, which needs the disease out of its herds.
	There is a great danger that, as time goes by, we shall forget some of the lessons of what happened in the last BSE crisis and the lesson of the Phillips inquiry—that we have to be constantly vigilant. I have also been involved in the discussions on whether TSEs in sheep can develop into dangerous BSE prions. I have no doubt at all that the evidence shows that the BSE prion in cattle is easily transposed into humans, which is new variant BSE. I think that research from the various CJD people will shortly take forward that point. It is very complicated research.
	Noble Lords will be pleased to hear that I shall not quote any paragraphs as I have not had time to do detailed research. However, when deciding this Motion, we should remember that there is really just one point. If we agree to the prayer, we shall lose all the other schedules. I have no view on the amendment, but some of it addresses other technical issues. I am simply pleading with the House that, in the interests of the community, our farmers and the health of our future herds, we should not agree to this prayer.

Baroness Carnegy of Lour: My Lords, it seems to me that democracy demands that Parliament ensures that it understands what it is doing when it legislates. It is not the Government who legislate; it is Parliament. The fact that Parliament is implementing a piece of European legislation does not let us off the hook at all. What Parliament has to do is ensure that the Government are proposing satisfactory legislation in response to European legislation.
	I listened very carefully to the comments of the noble Lord, Lord Whitty, and I think he was saying that this very long statutory instrument makes just three changes. I do not know why the changes have had to be made in this way, but I expect that there is a reason. However, it is very difficult for Parliament to know what it is doing when such lengthy regulations are necessary to make just three changes. I take it that the regulations were passed in another place under the negative procedure. If so, they were not discussed and were passed as long as no one objected. It seems to me that the Government simply must not do this.
	If a change required by European legislation necessitates such a long, complicated document—it took me a long time to read it today and I suspect that I still do not understand it all—the change simply must be made by means of a Bill. It probably would not take Parliament long to pass such a Bill because it would be properly explained by the Government. The issues which have been raised would be addressed. Parliament would understand that it had to make the change because of European legislation and everyone would be satisfied. It is also incumbent on Parliament to ensure that it does not legislate without the understanding of those who will be affected by the legislation. It seems that there are people in the farming industry who have still not seen these regulations.
	It is truly important that Parliament should not allow the Government to do this. It is not democratic, and that point should be taken very seriously. I shall not enter into the issues because I have not been involved in them before and would probably get them wrong. However, I hope that noble Lords on the other side of the House will not simply troop through the Lobby agreeing that the Government whom they support should pass legislation of this length, without any discussion, by means of the negative procedure. I do not think that that is good enough. If they agree to let the regulations stand, they would be saying that it is good enough. I hope that they are listening very carefully.

Earl Ferrers: My Lords, I declare an interest in so far as I have been involved in agriculture all my life. I am bound to say that I have a certain amount of sympathy with the noble Lord, Lord Whitty, and, indeed with the Government in so far as the Animal Health Bill foundered on the rocks. However, that is one of the hazards of parliamentary life. Indeed, that is what Parliament is for.
	As I understand it, the statutory instrument we are discussing contains much that was included in the Animal Health Bill. The noble Lord, Lord Whitty, referred to this as an unusual procedure. I should think that it is. If I may say so, the Government are in a mess with regard to this matter. I refer again to the Animal Health Bill. They now have a statutory instrument of huge length, 221 pages, as has been said. There is now a Prayer to annul the statutory instrument, an amendment to the Prayer and an amendment to the amendment. I agree with the noble Lord, Lord Whitty, that that is a most unusual procedure.
	The noble Lord, Lord Whitty, referred twice to the measure as a Bill. I know that that was a slip of the tongue but it was probably in the back of his mind and, indeed, in the minds of most of us that legislation of this length ought to be included in a Bill and not in a statutory instrument. The noble Lord, Lord Whitty, produced some persuasive arguments to demonstrate that the Government need this measure to protect public health. I understand that. However, what is the hurry? This matter has not suddenly come upon the Government. They have had plenty of time to produce the necessary provisions with which to draw up a Bill. The measure ought to have been presented in the form of a Bill. As my noble friend Lady Carnegy said, one cannot present a measure comprising 221 pages to Parliament and say, "You must take it or leave it". The matter ought to be considered properly.
	If the measure is to be presented in the form of a statutory instrument, why is it in the form of a negative instrument and not the affirmative resolution procedure? The affirmative resolution procedure would have given us time to consider the matter and discuss it. Yet, in order to do that, we have to have this curious procedure. Proposals of this nature ought to be presented in a proper manner and properly scrutinised. As I say, the measure should have been presented in the form of a Bill.
	The noble Lord, Lord Whitty, said that there is a connection between BSE and CJD. I am bound to say that I agree with the noble Countess, Lady Mar, in this regard. The scientists to whom I have spoken assure me that although the organisms which cause CJD may be similar to that which causes BSE, there is no known proven method of transfer between animals and humans. It is important to remember that as otherwise people become alarmed, possibly unnecessarily.
	One comes back to the statutory instrument. One wonders why it was introduced in such a hurry. It was laid before the House on 27th March, the day before Maundy Thursday. It came into effect one week after Parliament returned after the Easter Recess. One wonders why this has been done so hastily. I do not think that that is the right way to do it. The measure should have been presented in the form of a Bill.
	I say to the noble Lord, Lord Whitty, that it is a terrible thing to be presented with regulations entitled TSE (England) Regulations. I do not know whether your Lordships know what the letters "TSE" stand for but the majority of people do not. I did not know what TSE was; I knew what BSE was. I asked a knowledgeable Member of your Lordships' House whether he knew what TSE was. He replied that he did not. Someone in the Printed Paper Office put us out of our misery in that regard. I remember, when I was in the Ministry of Agriculture, reading a brief that referred to the BSC. I thought that it referred to the British Sugar Corporation but in fact it referred to the British Steel Corporation. Having read the brief, I had to re-read it because the change in meaning gave it a completely different sense and referred to a different part of life.
	I ask the noble Lord, Lord Whitty—if I can have his attention for a moment—to do what I used to do; that is, to circle acronyms such as "TSE". Doing so meant that the people would write it out in full and everyone would understand what one was talking about. One does not understand what one is talking about when one talks about "TSE" because it is easy to muddle that up with TSB, which is, of course, a bank.
	I do not like the regulations, for various reasons. I shall not go into great detail, other than to say that they give huge powers to inspectors. Inspectors can enter premises when they like and they have the right to destroy any animal, including, as the noble Countess said, horses, fish and cats. There is a difference between whether an animal is suspected of having a TSE and whether it is susceptible to it. As the noble Countess also said, inspectors can take records and everything else from a computer, including one's bank balance and even a list of one's lady friends, if one keeps such things on one's computer. Those are huge powers but there is no right of appeal, which is wrong.
	I shall not detain the House further by listing my other objections. However, the proposal should have been in a Bill. The Government should not try to railroad ideas through Parliament without giving it the opportunity for discussion.

Lord Mackie of Benshie: My Lords, the noble Earl voted for the Motion in the name of the noble Lord, Lord Moran, to delay the Bill. Under the Bill, there would have been an opportunity for discussion.

Earl Ferrers: My Lords, with great respect to the noble Lord, Lord Mackie, I cannot see what that has got to do with it. The regulations that have been advanced contain a whole lot of information that was in the Bill, but we cannot even theoretically amend or discuss the issues because they are raised through a negative resolution.

The Earl of Caithness: My Lords, the noble Lord, Lord Whitty, said that everything in the regulations relates to the EU directive. However, there are serious questions about susceptible animals that do not appear to be in the directive. He did not list them as one of the bits of gold-plating for which MAFF was once notorious; DEFRA is emulating that bad habit.
	The Minister did not answer the point that I raised when I intervened near the end of his speech. I asked about what would happen if the amendment in the name of the noble Lord, Lord Livsey, was not agreed to. How would the Minister implement his expectation of good will?
	I hope that the Minister will introduce a supplementary statutory instrument. He has already had to do so with Statutory Instrument No. 1253, which amends the TSE regulations. I hope that after today's discussion he will bring forward another amending statutory instrument, taking account of the serious concerns that many noble Lords have raised. When he does so, I hope that he will look carefully at the consolidations and at the sense of the consolidations. Approving a proposal and enacting it through a statutory instrument is not necessarily the right way to continue.
	I draw the Minister's attention in particular to the question of compensation, which is dealt with in Schedule 1. There are six main parts to that schedule and they set out four different ways of getting at the value of the animal, the carcass, the semen, the embryos or the ova. Of those four, only one is correct, and that is the established way. It is done by agreement between the Secretary of State and the producer of the livestock in default of an agreement by a valuer appointed jointly between them and, in default of that, a valuer appointed by the president of the Royal Institution of Chartered Surveyors.
	The other three relate to the different ways in which the valuer can be appointed. Sometimes it is done by the Secretary of State without consultation or agreement with the producer of the livestock; sometimes costs are allowed; sometimes costs are not allowed; and sometimes it is done by arbitration. However, there is no definition of "arbitration" or how the arbitration is constituted. There is no reference to who will take part, what the rights of the parties are, and who can be represented. Therefore, that is a grey area which requires attention.
	Also in relation to the question of compensation, I wonder why the noble Lord sees fit to re-enact the draconian measures with regard to sheep? If the noble Lord looks at Part III relating to compensation, on page 159 of the statutory instrument, he will find that the maximum value paid for any sheep is £400. But a pedigree animal can be worth many thousands of pounds. Why is the producer of sheep or goats being penalised to that extent when the owner of cattle is not? If the noble Lord turns the page, he will come to the section which deals with compensation for bovine animals—that is, at paragraph 6 on page 161. There, reference is made to the market value of the animal. There is no question of a limit. Why is there a difference between sheep and goats on the one hand and cattle on the other?
	I know that we cannot amend this statutory instrument, but I hope that the noble Lord will introduce a supplementary one in the near future, taking account of those points.

Lord Willoughby de Broke: My Lords, I have two principal objections to the statutory instrument. Like my noble friend Lord Northesk, I am not terribly soothed by the honeyed words of the noble Lord, Lord Whitty, when he says that there is no need to worry too much because the legislation is straightforward and there is no gold-plating. First, this SI does far more than it needs to do. Frankly, it is gold-plating on a royal scale. I do not believe that the noble Lord managed to address that point in his opening remarks.
	Secondly, some of the powers in the Animal Health Bill which your Lordships' House rejected are put straight into this piece of legislation. The gold-plating is principally the matter that concerns me and I believe that that is the crucial point in this legislation. EC Regulation 999/2001 refers throughout to animals which are "suspect" or "suspected" of having TSE. But these 220-page regulations refer throughout to animals being "susceptible". We have not yet received an answer as to why we have suddenly changed from referring to animals as "suspect" to referring to them as "susceptible". Those two words are very different. I believe that we must have an answer to that point before we vote tonight.
	Thirdly, I turn to the question of the Animal Health Bill powers, which, I repeat, were found unacceptable by your Lordships' House just over a month ago. We find, again, that magistrates have a power to grant a warrant of entry without the farmer having a power or even being aware that such an application has been made. I do not know whether the amendment of the noble Lord, Lord Whitty, addresses that point satisfactorily or whether the matter could be dealt with in this legislation.
	In some respects, the statutory instrument goes even further than the proposals in the Animal Health Bill. For example, it requires individual farmers to pay for the costs of slaughter and disinfection of their premises. That appears to be entirely unreasonable. After all, their animals are to be slaughtered at the behest of DEFRA. Yet farmers are expected to pay for the cost of slaughter and cleaning and disinfection. The only parallel I can find that is remotely close to that occurs in China. There, when someone is executed, the family is sent the bill for the bullet with which the person is killed. It is not only this statutory instrument that is grossly excessive, but also the timing, as noble Lords have mentioned. It appears to have been introduced hastily and incorrectly. It became law on 19th April, but it was not available for inspection on DEFRA's website until very recently, and it was not on the parliamentary website until a few days ago. According to DEFRA that was because some items had not been finalised and it needed to make some adjustments.
	If this instrument was recently still in draft, was it still in draft when it was incorporated into law on 19th April? I do not understand how a measure can be made law when it is still in draft form. My understanding is that it was still being corrected at the end of April and at the beginning of May. It is rather odd, to put it mildly, for a half-baked draft to be considered as law.
	The noble Lord, Lord Moran, asked about the accuracy of the regulations and whether they had been scrutinised by the Joint Committee on Statutory Instruments. I am pleased to be able to tell the House that that committee has had an opportunity to consider these regulations. The committee said that it had found a number of inaccuracies, inconsistencies and typographical errors. The committee's paper says:
	"The Committee draws the special attention of both Houses to these Regulations on the ground that they are defectively drafted in a number of respects".
	It lists errors of interpretation, errors of omission and typographical errors. That part of the report concludes by saying:
	"The Committee accordingly reports the Regulations for defective drafting, acknowledged by the Department".
	I believe that the committee considered the regulations on 29th April, so they were defective quite recently. I am not sure that they have been corrected properly. I shall be interested to hear about that when the Minister replies.
	The committee had a further concern about the regulations, as my noble friend Lord Ferrers mentioned. It stated:
	"They refer in many places, including the title of the instrument itself, to 'TSE' without any express explanation of the meaning of those initials. The Committee considered that it was unhelpful that the instrument nowhere contains an express indication of what TSE means".
	In its response to those comments and criticisms, the department produced a series of apologies, as it was right and proper it should. On the definition of TSE, the department said that it,
	"decided not to set out in full the expression 'TSE' in the title to the Regulations nor define it as the expression is already defined in the Community legislation for which the Regulations make administration and enforcement provision. (This is Article 3.1(a) of the Community TSE Regulations, Regulation (EC) No 999/2001 of the European Parliament and of the Council of 22 May 2001 laying down rules for the prevention, control and eradication of certain transmissible spongiform encephalopathies, OJ No. L 147, 31.5.2001, p.1, as amended by the other Community legislation defined in regulation 3(1) and explained in the explanatory note to the Regulations)".
	That is perfectly clear! The department's response continued:
	"The Department notes that persons likely to be affected by the Regulations were provided with the necessary references to the definition of TSE as part of the Department's consultation about the proposals for the Regulations. The Department also notes that regulation 3(2) provides that expressions not defined in the Regulations and which appear in the Community legislation for which the Regulations provide administration and enforcement have the same meaning in the Regulations as they have for the purposes of that Community legislation".
	That seems to be perfectly clear and straightforward to everybody. So 10 out of 10 for artistic interpretation but nought out of 10 for technical content.
	That brings me to my final point. As other noble Lords have said, this sort of law making, this gold plating, this casualness in introducing such enormous powers for the Ministry is unjust and unjustifiable. It one of the reasons—the noble Lord, Lord Whitty, may not recognise this—that the rural community lost its trust in DEFRA.

Lord Lea of Crondall: My Lords, is the noble Lord aware that I am a member of the Joint Committee on Statutory Instruments. Everything that has been referred to is quite normal procedure for the Joint Committee. On a typical meeting half a dozen matters are referred to for defective drafting of a minor character and they are typically dealt with at the next meeting by the fact that corrections are made.
	On the question of the use of abbreviations, it is a wider matter and it is generally understood now that, in the first instance, abbreviations will be used only in conjunction with some explanation of the full wording. Unless the noble Lord is filibustering, this lengthy procedure is not necessary.

Lord Willoughby de Broke: My Lords, I totally reject the insinuation by the noble Lord, Lord Lea, that I am filibustering; I am simply quoting from the report of his committee. I shall filibuster a second longer by repeating that it is said it was defectively drafted. I cannot see that drawing attention to that can remotely be called filibustering. But if he thinks it is filibustering he is entitled to his opinion. I cannot think that his intervention added anything at all to the debate.
	For the reasons I stated before I took the intervention, I believe that regulations of this kind are losing the trust of the rural community in DEFRA. I received a number of letters and e-mails—I shall not quote them because I shall be accused again of filibustering—to the effect that people no longer trust DEFRA or the regulations it is producing. These regulations are clearly an example of why. So if later this evening the noble Countess, Lady Mar, decides to divide the House, I shall join her in the Lobby.

Baroness Masham of Ilton: My Lords, in declaring an interest I ask the Minister two very short questions. How efficient are the tests for TSE? What is the prospect of a vaccine for spongiform encephalopathy? It is a serious matter when there is no right of appeal and mistakes may be made.

Baroness Byford: My Lords, I rise to support many of the comments made by the noble Countess, Lady Mar. If this matter were not so serious, I would not pass this remark: that it is pleasing to see so many Members on the Labour Benches tonight, who never normally attend the agricultural discussions we have in this House. I am afraid they will have to bear with us a little longer. We are not filibustering. In fact I think that comment was most unfortunate. In the real world, outside Parliament, the farming community has been through some desperate times. If people on the opposite Benches think that in some way we are filibustering, they are wrong.

Baroness Thornton: My Lords, I thank the noble Baroness for giving way. If we are to play this game, I can say that I have sat in this House with the Benches opposite completely empty while we discuss child poverty and urban deprivation. So I ask the noble Baroness not to patronise us in that way.

Baroness Byford: My Lords, the noble Baroness may say that if she wishes. But one of her colleagues in a recent housing debate, the noble Lord, Lord Graham—I do not know if he is in his place—apologised to the House that he was the only spokesman from the Labour Benches. He said, "I never thought I would see a Labour debate on social housing and we have only one speaker". So I am not casting aspersions. But it is true that tonight the Benches opposite are fuller than they normally are for agriculture debates, and we should record that fact.
	As I say, I rise to support the noble Countess, Lady Mar. As the noble Countess stated, regulations do not need separate legislation. G Dymond, who as many noble Lords will know is the House Research and Legal Information Librarian, stated in a letter to me on 15th April:
	"Regulations do not require national implementing legislation".
	Perhaps the Minister will clarify the situation because there seems to be some confusion.
	So why are we sitting here? I am sure that noble Lords on the Labour Benches would say, "Why indeed?". We are surely considering any gold-plating. I cannot believe that in the statutory instrument we are gold-plating after the Prime Minister promised the electorate only last year that there would be no more of it. Even the noble Lord, Lord Whitty, has acknowledged that there are three extra bits—

Lord Whitty: One, my Lords.

Baroness Byford: All right, my Lords, one bit extra, but there is a little gold-plating. I must ask why.
	Other noble Lords have referred to the science and I shall also take up that issue. There is no real scientific proof of the link between BSE and CJD or BSE and scrapie.

Baroness Howarth of Breckland: My Lords, I am a social scientist, not a general scientist, but empirical evidence that shows that BSE is declining with the measures that we have in hand is surely a good piece of evidence.

Baroness Byford: My Lords, I am delighted that the numbers are declining, but that does not necessarily—

The Countess of Mar: My Lords, I apologise for interrupting the noble Baroness. BSE is also declining because we no longer pour organophosphates on cattle.

Baroness Byford: My Lords, that just shows how difficult is the science. I do not wish to pit one against another, but there is still a question. The noble Countess herself said that she hoped that science would soon move on and be able to prove that.
	I ask the Government what proof there is. Could it be that all sheep are susceptible? If so, would they all have to be slaughtered? Do we face the possibility of becoming a sheep-free zone, having two years ago been the developed world's largest sheep producer? That scenario is decidedly scary, but I am sure that the Minister will have the correct version. Apparently, Mr Meacher, in evidence to the House of Commons Select Committee on the Environment, Food and Rural Affairs, stated that the Government have always known and appreciated the full extent of all implications of European Union legislation. But we do not have to legislate to incorporate the EU regulations. Presumably the Minister can enlighten us on all the implications of what we are about tonight.
	I should be particularly interested to know about cost. Many noble Lords will be aware that the Government intend to force farmers to insure against future outbreaks of infectious diseases. I wonder how many insurance companies will be willing to insure against the possibility that animals may be slaughtered not because they have the disease but because they are susceptible, not because they are next-door to a farm that has the disease but because they have been declared susceptible to the disease. The Minister must surely clarify the distinction between "susceptible" and "suspect" before we come to a vote—or not—later, because there are important differences between them.
	I have heard that, if the Government cannot agree insurance with farmers, they are considering imposing a levy on all sheep producers. Presumably they would use the proceeds of that to pay the costs of five things, to name but a few. Those are, first, the cost of science; secondly, the cost of a monitoring system; thirdly, the cost of a slaughtering system; fourthly, the cost of a disposal system; and, fifthly, the cost of a compensation system. Perhaps the Minister will reflect on that. I also ask him whether, should levy money come into being but prove to be inadequate to cover those various costs, the Government envisage paying for them themselves. If so, how much have they already reserved for that purpose?
	I am intrigued to know how the monitoring system will operate. As the law stands, farmers have a duty to report any notifiable disease that strikes their livestock. How will they know that an animal in their herd is susceptible? Will they be safe so long as no inspector comes to call?
	Much work has been done and is being done on genotyping in humans and the likelihood that some members of a family may inherit some ailments. I understand that it is rare to find that every member of a family has inherited the same suspect trait. In the past couple of weeks the EU voted a large amount of money for 15 research projects to find out more about inherited characteristics in animals. We welcome that and the Minister may wish to comment on it. It suggests to me that more powerful brains than mine will consider the possibility that not all animals in a flock will have the same susceptibility. Given the Government's lack of success in studying sheep's brains—they were examining cows' brains—I recommend that we persuade them to postpone this piece of legislation.
	That is not all. Noble Lords have heard me use the word "susceptible" several times. I know what I mean, but I wonder if it is exactly the same as what the Government mean. The regulations contain several words whose meaning can vary according to circumstance. Do the Government really mean "livestock" to include any creature, apart from a dog, that has a function in farming, including all types of horse? In Europe horses are considered as livestock animals; in this country they are not. That is on page 7. The continentals include horses in livestock because they eat them; in this country, on the whole, we do not. Horses have never been part of the British definition, and I want to know whether the Government will use the EU or the UK version.
	My noble friend Lord Caithness spoke eloquently about the contradictions in the definitions of compensation in the regulations, which apparently will apply to all animals except dogs. He particularly mentioned valuable breeding stock. Will the Minister say what science has excepted dogs from such draconian measures? Why include cats and not dogs? There must be some reason; there must be some science. I do not have the Minister's attention; perhaps I have someone else's.
	What methods will be employed to slaughter the cat, the goldfish in the pond or the children's pony? Where will it take place? Under which rules will the carcasses be treated? How will compensation be calculated? The mind boggles at how we will calculate the value of a goldfish. Will it be legal to employ a sheep levy to compensate someone for the compulsory death of a pet, albeit one living on the farm? What will the exceptions be? Will there be a Prime Ministerial override? Will there be another Phoenix rising from the ashes? Will there be the right of appeal that we have discussed tonight?
	Paragraph (7) of the regulations specifies that representations may be made to the Secretary of State where slaughter of a TSE-susceptible animal at premises other than a slaughterhouse is intended. Does that imply that there is a right of appeal only against the site of slaughter? Do the Government accept the theoretical possibility that a susceptibility to a family of diseases justifies the inclusion of our rare breeds under the regulations? Such an inclusion would cover the possibility of a disease that has not so far been shown to have any relationship to BSE, which is itself not a proven cause of new variant CJD. Many rare breeds would fall under the edict in the statutory instrument, and we have had many representations about that.
	There is a saying about throwing the baby out with the bath water. As noble Lords have said, rare breeds have other genes. Some are known to be important, and many of their characteristics—good or bad—have not yet been identified. I should hate these TSE regulations to be applied so stringently that we lost material whose value outweighed the risks which we removed.
	The Leader of another place said when challenged last week that the regulations apply only to carcasses. I would refer your Lordships to page 4 of the statutory instrument, where paragraph 4(2)(e) states,
	"any TSE susceptible animal, or the carcases of such an animal".
	I presume from that that the regulations cover living creatures, not just dead creatures.
	Finally, I cannot resume my seat without referring to the powers of the inspectors. They can corral, examine, test, mark and restrict movement. They can seize meat, processed animal protein or TSE-susceptible animals. They can slaughter, examine records, check computers and decide whether the regulations are contravened. Will the TSE rules which we are debating today apply in Scotland, Wales and Northern Ireland? I understand that they will not. If they do not, what rules are governing Wales, Scotland and Northern Ireland? If for any reason today the prayer to annul tabled by the noble Countess, Lady Mar, were carried, would that make a difference? Presumably, Wales, Scotland and Northern Ireland must have regulations in place. I do not understand where we are. Furthermore, what would happen to the people who keep stock on the borders between England and Wales and Scotland?
	I find tonight a very unsatisfactory affair—that we should be placed by the Government in a situation in which we either annul a large number of existing controls or we agree to extend them considerably. The noble Baroness, Lady Howarth, who spoke most compellingly—and I welcome her contribution—spelt out the difficulty of annulling existing controls. Although it would be for only a brief period, we would all assist the Government to remedy the deficiency, but the difficulty we are faced with tonight is not of our doing; it is of the Government's doing.

Baroness Thornton: My Lords, how many cases of CJD does the noble Baroness consider to be the price worth paying not to follow the advice of the noble Baroness, Lady Howarth?

Baroness Byford: My Lords, I am totally inadequate to answer the question and I say that most humbly. At present some scientists follow the thought of the noble Baroness, Lady Howarth, while other scientists clearly say that there is no proven link. There is still a big question mark out there. The noble Baroness, Lady Thornton, can shake her head but she asked me for my view. I can only give my view.

Lord Carter: My Lords, perhaps I may briefly interrupt the winding-up speeches. It may be for the convenience of the House to know that the noble Baroness, Lady Anelay of St Johns, has decided not to proceed with the Second Reading of the Marine Wildlife Conservation Bill this evening but we will find another date for it.

Lord Livsey of Talgarth: My Lords, I wish to exercise my right to comment on the amendment which I tabled today, referring in particular to subparagraph (a). Before doing so, I would like to enlighten the noble Baroness, Lady Byford. It is my understanding that in devolution the Welsh Assembly, the Scottish Parliament and the Northern Ireland Assembly proposed to bring forward secondary legislation. I believe that the legislation they bring forward will resemble what we are discussing today. That is my understanding as a Welsh Member of this House.
	In subparagraph (a) of my amendment, I seek merely to protect the rights of producers and animals and balance that between the vital human consequences of BSE and the impact of TSE. There is a balance to be struck and my amendment seeks to achieve that. The whole point of having a seven-day period is that if there is an appeal by a livestock keeper against the decision to slaughter, all the facts can be taken into consideration and assembled in order to make a good case to persuade the powers that be that perhaps they are wrong in deciding to slaughter. That is particularly the case in relation to the phrase, "TSE susceptible animals", a point which has been debated at great length this evening in the House. However, it would be helpful if we could have a more succinct definition than that presently contained in the statutory instrument.
	I am grateful to the Minister for accepting paragraphs (b) and (c) of my amendment, which will introduce a degree of independence into the appeal mechanism. If his amendment falls in a vote, I appeal to Members of the House to accept the whole of mine, including paragraph (a). It is worthy of support in order to achieve a balance of protection for those who actually produce the animals and whose welfare is extremely important.

The Countess of Mar: My Lords, I am grateful to all noble Lords who have supported me. I am very concerned that noble Lords should understand exactly what is happening tonight. Either a regulation is annulled by a prayer to Her Majesty or the regulation stays as it is. The noble Lord, Lord Livsey, spoke most eloquently and almost entirely supported my case. But his amendment will do no good at all. Similarly, the Minister's amendment will do no good because there is no obligation on the Government to take any notice of an amendment to a statutory instrument agreed by the negative procedure.
	We have one option only. Either we pray against the statutory instrument or we leave it as it is. A great deal has been said tonight and I do not wish to detain noble Lords any longer. I have made my points. I am extremely concerned about the constitutional position of this instrument and others that are being laid. We are told that they all follow the same pattern and that it has all been done before. That is not right. It is not democratic and it is not a parliamentary practice that should be allowed to continue. I leave it at that.

Lord Whitty: My Lords, this has been a wide-ranging debate in which, frankly, several of the points which have been made are not directly relevant to the issue before the House. I shall try to touch on a number of those which I think are germane.
	I, too, wish to clarify what is before the House. The key issue is whether, quite extraordinarily, this House is about to take a decision which will have severe implications both for public health and confidence in our livestock industry. If we reject these regulations, it may well be that, after many generations of having adopted this procedure, noble Lords do not like it. However, it is a fact that if we reject the regulations, there will be no BSE controls in place in England. That will be a significant blow to consumer confidence and it will have huge implications for people working in the farming industry and in the meat industry. Furthermore, it could well have widespread implications for public health.
	I wish to say a little about the issue of public health. Somewhat to my surprise, there is an agenda which has been quite explicitly expressed tonight by the noble Countess and—again to my amazement—largely supported by the noble Baroness, Lady Byford, querying whether it is necessary for us to have in place a BSE-control regime because there is some doubt about the science.

The Countess of Mar: My Lords, I must interrupt the noble Lord at this point. I accept completely that, given our present state of knowledge, we must have a BSE regime in place. I have no argument with that whatever. What I object to is the way it is being done; that is, the draconian measures that are being put in place. They may never be used, but those measures will be put in place. That is what is wrong.

Baroness Byford: My Lords, before the noble Lord rises to respond I, too, wish to register my strong objection. I shall check Hansard tomorrow because I am sure that at no stage did I say that we should not have a regime. I know full well that we should. It is a question of the way it is being brought in under the procedure before us tonight. We have had no chance to discuss it.
	I know that several noble Lords are muttering on the Benches behind the noble Lord, Lord Whitty, but I think that he will himself acknowledge that the issue of scrapie is relevant. The wrong brains were tested for at least six years. The science on scrapie is unknown. I do not know whether the noble Lord the Chief Whip wishes to disagree with me, but everyone acknowledges that there has been a mix up. For that and several other reasons we are questioning the way in which the regulations are being introduced.
	We support some restrictions in relation to BSE, but the density of the regulations and the way in which they are being introduced causes us great difficulty. We are being asked to do something without knowing the implications.

Baroness Hayman: My Lords, before the noble Baroness sits down—I apologise to the House for doing this, but it is a matter of grave concern—I hope that she will make clearer her position on this and on the link between variant CJD and BSE and the scientific debate now, before she checks Hansard. Anyone listening to her earlier comments would have felt that there was an equivalence in her view of the scientific debate between whether there was or was not a link between variant CJD and BSE.
	I understand the noble Countess's view on this point—it is very clear and understood—but even she would agree that she is a minority against a swathe of scientific opinion in this country, in Europe and in the world. The noble Baroness would be misunderstood if, from what she said earlier, she allows her former remarks to continue on the record.

The Countess of Mar: My Lords, I am reminded of Dr Lind, who discovered that vitamin C saved sailors from having scurvy. He was in a minority for 40 years, but he was right. Some scientists who have been looking at this issue may well be right that there has never yet been an infectious pathway proven for BSE or CJD.

Lord Whitty: My Lords, I was grateful for the noble Countess's earlier intervention when she made it clear that she was in favour of having a BSE regime, irrespective of the fact that she doubts some of the overwhelming scientific opinion. The noble Baroness also agreed with that. Nevertheless, the effect of a vote tonight to support the noble Countess's prayer would leave us without a BSE regime.
	I am grateful to my noble friend for pointing out the difficulty of the noble Baroness's position. I think the whole House understood that she was querying whether we should be acting on the "overwhelming" evidence, as it is referred to in the Phillips inquiry report, that variant CJD is caused by the transmission of BSE to humans. If that is the overwhelming opinion, I am particularly surprised, without making a cheap point, that the party that formed the previous government is not prepared to take the precautionary measures which we and the vast majority of scientific, veterinary and public health opinion suggest we should in maintaining a BSE regime and would jeopardise it in this kind of vote today.
	The noble Baroness said that these are draconian measures. But time and again I have pointed out that what we are doing with these regulations is consolidating existing statutory instruments which have already been operated and form part of the regime. The noble Lord, Lord Willoughby de Broke, referred to the number of statutory instruments which are covered. We are engaging in an act of consolidation of the existing regime and in the transposition of the European regime which has direct applicability.
	The noble Baroness asked why, if it has direct applicability, we need to spell out some of the provisions in the regulations. It is because the substance has direct applicability. The implementation of it is a matter for the nation state—as is always the case in this kind of legislation at European level—which means that we have to spell out how we are to fulfil our European commitments. The only part of these 220 or so pages that can conceivably relate to gold plating is the one example I quoted in relation to incineration. We are doing so because we have had heavy advice from the advisory committee in that area and we thought it sensible to take the opportunity to include that.

The Countess of Mar: My Lords, I am sorry again to interrupt the Minister. There is another point of gold-plating. The noble Lord has been asked over and again about the difference between TSE suspected and TSE susceptible. The noble Duke made the point that his cattle are susceptible to BSE but they may not be suspected of having BSE. That makes a huge difference to the number of animals under consideration.

Lord Whitty: My Lords, a huge misunderstanding has been wound up both inside and outside the House to suggest that there is a change in approach. In order to carry out the European surveillance and monitoring requirements, the statutory instrument refers to TSE susceptible animals for a straightforward reason. Under EU legislation which we are here transposing we are required to carry out the testing of animals fit for human consumption which have already been sent to the slaughterhouse, are fallen stock or are otherwise slaughtered. Those animals are not TSE suspect. They are not exhibiting any sign of a disease. But they are required to be tested for the purposes of the EU monitoring.
	There are no new slaughter powers in this legislation. The slaughter powers referred to in paragraph 4 and beyond are a repetition in almost the same terms of the existing provisions. They relate to a situation where an animal is suspect, where a vet decides on balance that it is likely to be suffering from a TSE, in particular from BSE. That is the difference. The susceptible reference is in order to carry out the monitoring which we are required to carry out under the EU legislation.

The Duke of Montrose: My Lords, I have already asked this question. Under which current legislation is an inspector allowed to slaughter any TSE susceptible animal? I refer to paragraph 4(2)(k).

Lord Whitty: My Lords, there has been much reference to paragraph 4 and in particular to paragraph 4(2)(k). The powers relating to slaughter relate exactly to the circumstances to which I have already referred. They apply only to the specified EU monitoring programme and would come into play only if an abattoir refused to slaughter an animal which had been selected for testing under the various provisions. All those animals would already have been sent to slaughter by their owners in the normal course of events.
	In terms of which existing statutory instruments that relates to, it primarily relates to the BSE Order No. 2 1996 and the Sheep and Goats Spongiform Encephalopathy Regulations 1998. It is a re-enactment of those provisions and no more. Therefore, all this agitation about an extension of slaughter powers is misplaced. The noble Countess honestly and frankly said that it may have been there before but I do not agree with what was there before. That may be her position. But the House today is being asked to re-enact in consolidated form, and in a form which is consistent and in conformity with our EU obligations, what is already in the UK regime.

The Duke of Montrose: My Lords, Statutory Instrument No. 3183 deals with animals which have been exposed to infection rather than being susceptible.

Lord Whitty: My Lords, that is precisely my point. Where one talks about a suspect animal that is the only situation where the slaughter powers arise. It is a suspect animal which is susceptible to BSE; otherwise the decision to slaughter on the grounds of BSE could not apply. That is why we need to distinguish between "suspect" and "susceptible". The reason that the term "susceptible" is there is because there will be animals which are subject to the testing, monitoring and surveillance provisions which are not showing any suspect symptoms. Obviously that is how we establish the prevalence or otherwise of the disease.
	The other misapprehension is in relation to animals. It was some time before goldfish were mentioned but the noble Baroness eventually got round to it. These provisions are required in order to enact the EU monitoring programme that we are required to enact; the remainder are already in UK law. The EU regulation, I think that it is paragraph 4, specifies the monitoring and surveillance programme for bovine animals, then for ovine and caprine animals—no others. We are not talking, therefore, about a surveillance programme which involves dogs, cats, goldfish, deer or any other animal apart from those which are specified in those provisions; and "any animal" refers to animals covered by those provisions. Part of that regulation relates to feed. The regulations in that respect refer to "farm animals". Dogs could be construed as farm animals and, therefore, are excluded. I assume that the same applies to humans, but that may be slightly stretching the point. That is why dogs are particularly spelt out, while goldfish are not.
	I turn to other points raised. The noble Lords, Lord Moran and Lord Willoughby de Broke, referred at length to the Joint Committee on Statutory Instruments. It is regrettable that a number of typographical errors were found in the regulations. There was also the question raised by the noble Earl, Lord Ferrers, as to whether we should spell out the full meaning of TSE. That was all that was queried by the JCSI. The committee did not see any objection to using the negative procedure and statutory instruments drafted in this way to consolidate and transpose the regulations.
	I return to my amendment and that tabled in the name of the noble Lord, Lord Livsey. The noble Lord, Lord Williamson, asked whether my amendment meant anything more than what was already contained in the regulations. The references to appeal apply very specifically to particular areas within the regulations. My response to the recommendation of the noble Lord, Lord Livsey, was that we need to ensure that there is some ability to make representations in all such cases. It is, therefore, wider than what is already in the regulations. My objection to the position taken by the noble Lord, Lord Livsey, was primarily on the seven days, which could seriously limit the ability to act quickly in an area where there are some BSE suspect beasts. That is why I have couched it in these more general terms, removing the seven-day requirement, which, literally interpreted, would mean that we had to wait for seven days in every case before we could take action in case there was an objection, or what the noble Lord refers to as "an appeal".
	As far as concerns using the negative procedure—

Lord Pearson of Rannoch: Can the Minister inform the House of the time-scale envisaged in his amendment?

Lord Whitty: My Lords, there is no time-scale implied because we are looking at how it would apply to different parts of the regulations. The seven-day period would inhibit the most urgent cases, though it would not necessarily inhibit some of the other provisions in terms of tracing and testing. It may vary in different parts of the regulations. If we accept this recommendation, the instruction of the House would be for us to consider options to achieve what the noble Lord wishes to achieve in his amendment. Therefore, I wish to show the way in which we are—I hope, with good will—considering the reservations that some Members of the House, and beyond, have about how we would carry out these regulations. I absolutely accept that if we agree either the amended amendment or the original amendment we would still have the regulations in place. As noble Lords will have gathered by now, that is my objective in this debate in any case.
	I shall comment briefly on the question of using the negative procedure in this respect. We use that procedure here, and, indeed, have done so for nearly 30 years in order to transpose measures with varying degrees of success—and, yes, with gold-plating on occasion by all governments. We have transposed under the 1972 Act by the negative procedure. This falls well within the normal way in which such regulations are transposed.
	I believe that the noble Baroness, Lady Carnegy, was referring to the length of such regulations. However, they do consolidate a great many provisions; indeed, there are other consolidated regulations that are similarly lengthy and which have been dealt with by the negative procedure. If the House wishes to change that process, we have to change the primary legislation in order to provide for it.
	I do not think that at this stage of the evening I need go into all the additional points. Perhaps I may merely reply—

The Earl of Northesk: My Lords—

Lord Whitty: My Lords, I was about to anticipate the noble Earl. He may or may not believe me, but I was about to do precisely that and repeat what I said at the beginning.
	In relation to data protection, as in relation to human rights, as in relation to an obligation on the Government to act proportionately and reasonably in carrying out these provisions, that applies and qualifies anything that is in the statutory instruments.
	In relation to the noble Earl's specific point about notification under the technical standards and regulations directive, I did take up the point that he was kind enough to raise with me last night and sought advice on the matter. The advice is that this does not apply to the TSE regulations because the regulations provide administration and enforcement of a particular EU obligation. The technical standards directive applies only to national legislation which gives effect to national policy. In so far as they are national regulations, they do not change those that have already been deemed to have been retrospectively notified.

The Earl of Northesk: My Lords, the Minister will recall that I inquired about a specific point; namely, whether or not the DTI had been consulted about the notification status of the regulations. That is the fundamental point I am trying to get at.

Lord Whitty: My Lords, I indicated that I sought advice. I have no doubt that the guidance from the DTI has taken account of that advice. As to whether anyone has talked to the DTI in the past 24 hours, I cannot say. I do not believe that it would be normal for us to reveal to the House the exact intensity of interdepartmental discussions on these matters. The advice clearly indicates that it would be not necessary in the transposition part of this to register it.

Baroness Carnegy of Lour: My Lords, is the Minister going to answer the question put by my noble friend the Duke of Montrose about the position in Scotland? I believe that there are also plans relating to Wales. On page 205 and 206 of the regulations, 14 orders are revoked. Only the last two specifically refer to England. Are these all being revoked now for Scotland and Wales, in which case the people in Scotland and Wales will be totally unprotected because the measure applies only to England? Or are they being revoked only in relation to England? I do not see a reference to that. Please will the Minister reply to that point?

Lord Whitty: My Lords, the orders have been revoked in relation to England. I thought that the noble Lord, Lord Livsey, had already answered that point on my behalf. To repeat the point, they are revoked in relation to England. The measure before the House therefore relates to England. I understand that in Scotland, Wales and Northern Ireland, equivalent legislation will be introduced later this month, as the noble Lord indicated. I hope that that answers the noble Baroness's question.
	This has been a wide-ranging, and at times difficult debate. I do not think it appropriate to speak for much longer, except to underline the point made by the noble Baroness, Lady Howarth; namely, that the regulations are primarily about public health. Noble Lords may have doubts about the science, and they may have concerns about the way in which the regulations may be implemented. But I hope that the whole House will recognise the necessity of having in place a proper regime to deal with TSEs, and to deal with the potential damage to public health as well as to animal health from BSE, and that it would be deeply irresponsible of this House to reject the existence of such a regime.

Lord Monson: My Lords, before the noble Lord sits down, he has not answered the important point raised by the noble Earl, Lord Caithness, and others as to why the maximum compensation for slaughtered sheep is limited to £400, whereas there is no such limit in the case of cattle.

Lord Whitty: My Lords, I thought that I answered the point in general terms.

Baroness Byford: My Lords—

Lord Whitty: My Lords, I can answer the point in general terms, begging the noble Baroness's pardon. This is the enactment of existing legislation. There is a real problem for the House. On the one hand, noble Lords are saying: do not gold-plate and do not alter the EU regulations. On the other hand, they are asking us to do precisely that. The present regulations have that limit and have done for some time. We may need to look at that at some point, but they do not introduce any new cap on the value of sheep. I wish to put my amendment to the House.

Baroness Byford: My Lords, before the Minister sits down—

Noble Lords: No!

Baroness Byford: My Lords, I think that I am in order. I checked with the Clerks before. I do not think that I am out of order—I hope not.
	The Minister has not addressed my question about what is happening in Scotland and Wales.

Lord Whitty: Yes, I have.

Baroness Byford: My Lords, I apologise to the noble Lord if he has done so. I should like to take the point a step further. If we support the annulment proposed by the noble Countess, Lady Mar, will the existing legislation re-enact itself? What will happen? I should like the Minister to clarify that, because it makes a difference. It has been suggested that I do not care about what happens to human health or what happens on the BSE side. As a responsible person who has in the past bred stock, I am acutely aware of our responsibilities. We need to be very clear about the consequences if we go down a certain line. That is why I am asking the Minister to be kind enough to clarify the situation for all of us.

Lord Whitty: My Lords, I thought that I had made this clear at the beginning and in correspondence. The position is that, because the instruments have been laid with effect from 19th April, the previous regime is revoked. If we annul the provision tonight, there will be no regime in place from that point. The noble Baroness is correct to say that we could get together and find some other regime, but that takes time. For a period there would be no regime in place. That is why I say that we would risk not only public health but also confidence in our livestock industry if we went down the road suggested by the noble Countess this evening.

Baroness Darcy de Knayth: My Lords—

Lord Tordoff: The Question is—

The Countess of Mar: Order!

Baroness Darcy de Knayth: My Lords, will the Minister and the House forgive me? I have never intervened in debates on agriculture, so I feel very hesitant, but this is not a question to do with agriculture. Having listened as an outsider, I feel that the amendments have moved us forward. However, I do not think that the Minister's comments about the constitutional issues have answered one point that still bothers me. My noble friend Lady Mar said that we can amend the instrument, but the Government do not have to pay any attention to such amendments. I do not think that the Minister has answered that. Will he make the position clear for an idiot non-agricultural lay person?

Lord Whitty: My Lords, as the noble Countess pointed out, the passage of the amendments would leave the regulations in place, allowing them to proceed. The amendments would not alter the regulations, but they call on the Government to take action to fulfil the objectives enunciated at the beginning of the debate by the noble Lord, Lord Livsey. We have said that we have sympathy with that view and will act on it. The issue is whether we have the regulations—and therefore a regime—in place or not.

The Countess of Mar: My Lords, I am sorry, but I must get this point over. The Minister is under no statutory obligation to accept any of the amendments. If he were to leave office tomorrow, the next Minister would come along and say, "It wasn't me".

On Question, Whether Lord Whitty's manuscript amendment to Lord Livsey of Talgarth's amendment shall be agreed to?
	Their Lordships divided: Contents, 95; Not-Contents, 16.

Resolved in the affirmative, and amendment agreed to accordingly.
	On Question, Lord Livsey of Talgarth's amendment, as amended, agreed to.
	On Question, original Motion, as amended, agreed to.
	House adjourned at five minutes past eleven o'clock.